Tuesday, January 25, 2011

Hope Springs Eternal At Roma

While football fans were purring in appreciation at the dazzling dribbling skills exhibited by French international Jérémy Menez that sealed Roma’s comprehensive 3-0 victory against Cagliari at the weekend, it may have escaped their attention that the giallorossi had stealthily moved into third place in Serie A after winning five of their last six games, which is some comeback after their indifferent start to the season. In fact, it’s beginning to look like this year could be a repeat of last year’s heroics, when Claudio Ranieri’s team staged a remarkable recovery to finish as runners-up to José Mourinho’s all-conquering Inter team, guided by their charismatic captain, Francesco Totti.

However, as important as these victories are to Roma’s campaign, this is not the greatest challenge facing the grand old club these days, as their very existence has been called into question. With depressing inevitability, their problems off the pitch came to a head last summer, when the club was officially put up for sale, after many years of financial difficulties. They reported a thumping great €22 million loss in 2009/10 and have a large hole in their balance sheet. This has resulted in them struggling to pay their wages, so much so that the players only received their money for July, August and September in November - on the very last day that they could be paid without the league imposing a points penalty.

Unsurprisingly, this has caused the supporters great consternation, as there is a clear risk that players could be sold to shore up the club’s finances with some talk of Montenegrin striker Mirko Vucinic being allowed to leave. Some players’ contracts are coming to an end, including faithful servants such as centre-half Philippe Mexès and midfielder Simone Perrotta, who could depart on free transfers if their agreements are not renewed. Even if Roma manage to retain these players, they will have to find money from somewhere to reinvigorate an ageing squad at some time.

"Roma welcomes home Ranieri"

It seems incredible that a prestigious club like Roma could be in such dire straits. After all, this is one of Italy’s most successful clubs, having won the Serie A title three times, most recently in the memorable 2000/01 season under Fabio Capello with a team featuring the attacking talents of Gabriele Batistuta, Vincenzo Montella and that man Totti. They have also seen European glory twice narrowly elude them, losing out to Liverpool in the 1984 European Cup after a penalty shoot-out and their perennial rivals Inter in the 1991 UEFA Cup.

It’s not all ancient history either, as the last decade has arguably been one of their best ever, at least on the pitch, as they captured one scudetto, finished second in the league on no fewer than six occasions and reached the Italian Cup final six times, winning twice (in 2007 and 2008). According to research by the Italian media, Roma is the fifth most supported club in Italy, only behind Juventus, Inter, Milan and Napoli.

So, the obvious question is what on earth has gone wrong?

Many commentators speak of the club’s enormous debts, but that’s not strictly accurate. The club itself has a very small net debt of €9 million and has actually had a cash surplus for the previous few years, which is a notable achievement in the highly pressurised world of football. Even the net balance owed on transfer fees, which can be very high at Italian clubs, is only €3 million.

However, the problem is that the club’s owners, the Sensi family, which owns the club via its oil storage company Italpetroli, do have huge debts with the banks. These were around €405 million at the last count with €325 million being owed to Unicredit and €80 million to Monte dei Paschi di Siena, but they are probably even higher now.

You might be forgiven for thinking that this has nothing to do with the football club, but unfortunately there is an impact, as the main creditor Unicredit, which is facing challenges of its own in the troubled banking sector, has insisted that Italpetroli clears its debts and the only way of doing that is for the company to liquidate its assets, including AS Roma, which is now very much in the shop window.

"Rosella Sensi - no smoke without fire"

Italpetroli is in a desperate situation with bankruptcy threatened and auditors questioning their accounts, so they have no other viable options remaining. Indeed, Unicredit has already taken control of the Sensi family’s other assets, leaving them with just their residential properties. The owners’ financial difficulties also obviously mean that they have no spare money to invest into the club.

The Sensi family has held a majority stake (67%) in Roma since 1993, though times have undoubtedly changed since Franco Sensi used to boast, “13% of Italians travel around using my oil.” Although initially criticised by the club’s passionate support (“Sensi senza senso”), the fans slowly warmed to Franco, especially when he opened his cheque book to buy the likes of Batistuta, Emerson and Walter Samuel, the highlight being a memorable celebration in the Circo Massimo to honour the championship win in 2001. However, after his death from illness two years ago, his daughter Rosella took charge and, since then, the future of the club has been uncertain with frequent speculation about a change in ownership.

At the same time, fans have been unhappy with the lack of investment by the owners in recent years. In the last two seasons, Roma have spent relatively little in the transfer market with the only signings of any note being Nicolás Burdisso and Marco Motta. Indeed, they have actually generated net sales proceeds of €19 million in that time, largely thanks to the sale of creative midfielder Alberto Aquilani to Liverpool. This total was only surpassed by Udinese, a club famous for doing prodigiously well at making money from transfers, and the Milan giants, whose figures were boosted by the extremely lucrative sales of Zlatan Ibrahimovic to Barcelona and Kaká to Real Madrid, while all other clubs in Serie A spent more than Roma.

Hence, the sense of relief among the majority of the club’s supporters that the Sensi family’s reign is coming to an end after 17 years in charge of La Maggica. Even Rosella now seems to realise that her time is up, “The day in which an interested party with a genuine project for the club appears, we won’t have a problem in taking a step back, albeit with a heavy heart.”

Although Rosella continues to hold the reigns, her position as president is a nominal one, merely ensuring continuity in the interim period, and in reality it is now the bank that is calling the shots. Ever since 2004, when it acquired Capitalia, another bank that helped restructure Italpetroli’s debt, Unicredit has owned 49% of Italpetroli, but it clearly has little desire to own a football club, which it effectively does now through its control of Italpetroli’s 67% stake. This helps explain its decision to sell the club, an agreement that Sensi admitted was needed in order to “safeguard” the club’s future.

"The grinta of Daniele De Rossi"

The requirement for someone else to take control has been amply evidenced since the summer with Unicredit having to advance €15 million in September to finance the transfer market acquisitions campaign, though €11 million of that was reportedly repaid in October, and a further €25 million in November to cover the wage bill, though this has been supported by a factoring arrangement, whereby some of the club’s future television receipts have been passed to the bank in exchange for the injection of cash.

Rothschild has been appointed as the advisor tasked with finding a buyer for the club, a process that has been facilitated by creating a new company, imaginatively named NewCo Roma, for Italpetroli’s 67% share. The division of ownership in NewCo remains unchanged with the Sensi family holding 51% and Unicredit 49%, but, importantly, Sensi cannot prevent a sale to a buyer deemed acceptable by the bank. At the point of sale, she will have to step aside.

However, it has not proved to be as easy to sell the club as Unicredit would have hoped. Having signed the agreement to place Roma on the market in July, they initially hoped that the process would be completed in September (“we’ll find a buyer in three months”), but that always appeared overly optimistic. That date passed, as have a number of others, with the deadline first being slipped to November, then extended to December, leaving the latest date for bids as the end of January. In fairness, the sale was somewhat comprised by the resignation of Unicredit’s CEO, Alessandro Profumo, in September, nor was it helped by Roma’s disappointing start to the season, but all these delays don’t exactly encourage the thoughts of a positive outcome.

"Philippe Mexes - the French connection"

One potential barrier to completing a sale might be the price being asked by Unicredit. It is understood that the minimum they are looking for is €100 million, though they are believed to be hoping for €130-150 million. Interestingly, the Sensi family will receive 5% of any figure above €100 million, so it is in their interest to help achieve the highest price possible. Before the economic crisis struck a couple of years ago, analysts thought that the club was worth at least €200 million, so the most opportune moment to find a new owner has almost certainly long since passed.

Indeed, a couple of years ago, it was reported that billionaire financier George Soros had made a €283 million bid for the club through his global sports investment arm, Inner Circle Sports, though this has never been confirmed. There have been many expressions of interest over the last few years from all corners of the world, but, for one reason or another, they have never come to fruition. Unicredit appears unruffled: “The sales process continues as planned” and “We are still in discussions with a number of potential purchasers to whom we have provided further details as a preparation for binding offers.” In spite of these bland words of comfort, the fans are understandably still nervous, given how long the procedure is taking.

Nothing is known for certain about any prospective owners, but the short list would appear to have come down to three reasonably credible candidates: (a) Aabar Investment, the sovereign wealth fund of Abu Dhabi, already owns 5% of Unicredit and would surely have the resources to both finance a bid and make investments into the club. (b) The Angelucci group, whose wealth is primarily derived from health clinics, though it also publishes “Libero” and “Il Reformista”, is reported to have already made an offer of €86 million. This low bid has been cited as evidence that this group would not have sufficient capital to make a success of the club. (c) A mysterious American entrepreneur, whose name has not been divulged, though some have suggested that this might well be John Fisher, the owner of the Gap clothing empire, who has approached Roma in the past, or even Steve Tisch, owner of the New York Giants.

"Marco Borriello shows the way ahead"

Many others have seemingly fallen by the wayside, including Francesco Angelini, the wealthy owner of a pharmaceutical company; Clessidra, an Italian private equity firm; and Naguib Sawiris, the Egyptian entrepreneur, who owns telecoms provider Wind, which just happens to be Roma’s main sponsor. Expressions of interest have also apparently been heard from the usual suspects in Asia, China, India and Russia, but that’s just par for the course when a football club is put on the block.

Of course, it’s not enough for the buyers to have enough money to just buy the club. No, they will also need to find a lot more cash for other investments. Right off the bat, they will need to inject around €50 million of capital to strengthen the balance sheet, and probably a similar amount to strengthen the squad. So, if we assume that the club can be bought for €150 million, that would mean a total outlay of €250 million – or a quarter of a billion. That’s without counting the cost of a new stadium and training ground, which would be needed if Roma are to compete internationally in the future. No wonder Federico Ghizzoni, Unicredit’s current chief executive, explained, “For us, it’s not only the price that’s important, but also the future of the club, in other words the quality of the investor.”

So, what sort of business would a buyer get for his money?

On the face of it, the profit and loss account does not look too bad up until last year, when the club reported a hefty €22 million loss. In the four previous years, they made two large profits (€14 million in 2007 and €20 million in 2008) and two small losses (€4 million in 2006 and €1 million in 2009). In a way, the 2010 loss was perfectly understandable, as the revenue dropped dramatically by €24 million, largely due to the failure to qualify for the Champions League. However, there are two reasons why this loss was worrying. First, even though the revenue fell, there appeared to be no attempt to compensate by cutting costs; in fact, they slightly increased. Second, the loss was incurred despite a very healthy €19 million profit on player sales, the highest recorded in the last five years.

Unfortunately, the loss next year is likely to be at least as high. The club has not provided an estimate, but has warned that, “2010/11 will close with a significant loss, which will require some form of financing.” The Italian media has spoken of a loss as high as €40 million, though this will be impacted by a number of factors. On the plus side, the return to the Champions League will make a material difference to the revenue, but this will be reduced by the new collective agreement for TV rights. Furthermore, the moribund nature of the transfer market last summer means that there will be a limited profit from player sales – unless one of Roma’s higher rated players is sold in the January window. Actually, the lack of sales activity had a double whammy impact, as Roma were unable to meaningfully reduce their wage bill.

At first glance, Roma’s revenue does not look too bad. If we look at the Deloittes Money League for 2008/09 (the most recent season available), which ranks clubs in order of their revenue, we can see that Roma are reasonably well placed in 12th position with €146 million, just ahead of Champions league regulars Lyon. However, a closer inspection reveals some weaknesses. For example, their revenue is a long way behind the Spanish powerhouses, Real Madrid and Barcelona, whose revenue is around the €400 million mark, which might be expected, but it’s also much lower than the leading English clubs, whose revenue is at least €100 million higher.

While Roma are settled in the cluster of four Italian clubs, it should be emphasised that the triumvirate of Juventus, Inter and Milan all earn around €50 million more, largely because those clubs have better TV deals, but also because they have better exploited commercial opportunities. Nevertheless, the club’s revenue still represents a solid foundation upon which a new owner could build and that gap could represent a realistic growth target.

Two other observations really hit you in the face. Roma’s match day revenue of just €19 million is extremely low, so much so that it’s actually the second lowest of any team in the top twenty clubs listed in the Money League, representing only 13% of the club’s total revenue. On the other hand, the huge reliance on television revenue of €87 million is all too evident, as this accounts for a weighty 59% of total revenue. In fairness, this fell to 54% in 2009/10, but this was more due to the absence of Champions League money than any growth in other revenue streams.

Before further commenting on the revenue, I should explain that the figures in my analysis are different from those quoted by Roma. In order to be consistent with other clubs, I have followed the definition used in the Deloittes Money League. For example, their latest report excluded the following items: (a) gate receipts given to visiting clubs €3.1 million; (b) TV income given to visiting clubs €11.4 million. Adding the total adjustments of €14.5 million to the Money League revenue of €146.4 million gives the €160.9 million revenue reported by AS Roma SpA.

Back to business and we were noting the importance of TV to Roma, which is a common factor among Italian clubs’ revenue profile. In fact, the list of top ten clubs by television revenue in the Money League includes four sides from Italy. As Rosella Sensi beautifully put it in the last annual report, “We live in an era of the virtual stadium.”

Roma generated €87 million TV revenue in 2008/09, including €60 million from the domestic broadcasting deal with Sky/Mediaset and €26 million from the Champions League. The 24% decrease (€21 million) in 2009/10 was almost entirely due to the fact that Roma only qualified for the Europa League, which brought in a paltry €2 million. If you’re wondering why the TV revenue was so high in 2007/08 at €106 million, this was again partly because of the Champions League (worth €29 million that year), but also due to a once-off payment of €15 million for domestic TV rights.

Up until now Roma have benefited from selling their TV rights individually, though their €60 million deal (net of mutuality payments) is still a long way short of the €90-100 million deals negotiated by Juventus, Inter and Milan. As from the 2010/11 season, this structure has been replaced by a return to a centralised collective deal, which Roma have advised will lower their TV income, though they have yet to quantify the magnitude of the reduction.

The decrease may not be quite as bad as some fear for a couple of reasons. First, the total money guaranteed by exclusive media rights partner Infront Sports will be approximately 20% higher than before at over €1 billion a year. Second, the complicated distribution formula still favours the bigger clubs like Roma: 40% will be divided equally among the 20 Serie A clubs; 30% is based on number of fans (25%) and the population of the club’s city (5%); and 30% is based on past results (5% last season, 15% last 5 years, 10% from 1946 to the sixth season before last). Nevertheless, there is still talk of top-flight Italian clubs breaking away to form Lega Calcio Serie A in an attempt to emulate the English Premier League and increase their share of television revenue.

As we have seen, qualification for the Champions League is imperative for Roma’s business model and unsurprisingly the club’s accounts identify this as one of the key risks influencing the club’s economic prospects. It’s not quite as straightforward as saying that the club makes a profit in years when it reaches the Champions League and makes a loss when it fails to do so, but that’s not a million miles from the truth.

The accounts actually state that the total revenue difference between the Champions League and Europa League amounted to a whopping €26 million, when additional gate receipts and increases in sponsorship payments are included. As an illustration of the “Champions” effect, in the purple patch between 2007 and 2009, during which Roma reached the quarter-finals twice and the last 16 once, the TV receipts alone averaged a very handy €20 million a season. The payments have risen since then, so if Roma were to again reach the quarter-finals this season, which is an entirely feasible target, given that they have been drawn against the inconsistent Ukrainian side Shaktar Donetsk in the last 16, they could expect to receive at least €30 million.

Another area where Roma have lagged behind their Italian counterparts is the commercial operation, which generated only €38 million last season (€41 million in 2008/09). To place that into context, Milan earned €64 million, Juventus €54 million and Inter €53 million. The deficit is explained by the differences in the main two sources of commercial revenue, where the other clubs earn more: (a) shirt sponsorship: Roma – Wind €7 million, Milan – Emirates €12 million, Juventus – Betclic €8 million, Inter – Pirelli €9 million; (b) kit supplier: Roma – Kappa €5 million, Milan – Adidas €13 million, Juventus – Nike €12 million, Inter – Nike €18 million.

Actually, the situation is even worse at Roma, as the agreement with Wind, the shirt sponsor, was extended by three years to conclude in June 2013 at a lower guaranteed amount. Previously, this had been €7 million, but is now scheduled to be: 2011 €5 million, 2012 €5.5 million and 2013 €6 million, though this will be increased by €1 million for every season in the Champions League. This does not seem to me to be a wonderful demonstration of negotiating skills, but let’s not forget that this is a club that recently went an entire season without a main sponsor. In fairness, the Kappa equipment deal does have built-in increases from €5 million to €8 million over the course of the contract running until 2017.

Even though there is plenty of room for improvement in marketing, Roma’s real revenue weakness is match day revenue, which is extremely low at €19 million. To be fair, this is a well-known issue in Italy, as we can see in the Money League, where the four Italian clubs all languish in the bottom half of that table. That said, it’s clearly more of a problem at Roma (and Juventus €17 million) than Milan €33 million and Inter €28 million. More importantly, this revenue is miserably low, compared to their European peers. At the other end of the spectrum, Manchester United and Arsenal generate €128 million and €118 million respectively, which is more than six times as much as Roma. That’s a huge competitive advantage for the English clubs, especially as it happens every single season.

The difference is largely attributable to ticket prices, but it’s also down to smaller crowds. Last season, Roma’s average attendance of 41,000 was up 4% and was the third highest in Italy, only behind Inter 56,000 and Milan 43,000, but this was still only the 28th highest in Europe. Also of concern is the fact that Roma only fill 56% of the 72,700 capacity of the Stadio Olimpico, which is the lowest percentage of all Money League clubs.

"Grounds for optimism?"

This only emphasises the need for Roma to address the issue of their stadium, which is owned by the local council, rented by the club and shared with city rivals Lazio, thus reducing its revenue generating capacity. The lack of ownership means that they miss out on profitable opportunities like premium seating, corporate boxes, restaurants, retail outlets, naming rights and non-sporting events.

That is why in September 2009 Roma unveiled plans to build a new 55,000 capacity stadium in the Aurelia zone of the city with Rosella Sensi explaining, “It’s a project to bring economic stability to the club.” Although the ground would be smaller, it would generate much more revenue. In particular, premium seats could make a big difference, if you consider that Arsenal make 35% of their match day revenue from just 9,000 premium seats at the Emirates. Significantly, all of this income would go directly to the club, as they will no longer have to share it with Lazio or the local council.

Obviously, there’s no such thing as a free lunch and a new stadium would require a huge initial outlay (estimated at around €300 million) and is not necessarily a magic bullet, given that it would be difficult to raise ticket prices in an economic recession, but it could have a dramatically beneficial impact on Roma’s revenue. You only have to look at how the gap with Arsenal’s revenue has grown from €15 million in 2005 to €139 million in 2010, with most of the growth coming since 2007 – the first year that the Emirates became operational – to appreciate that it could be worth the risk.

Indeed, this way of thinking has been embraced by other Italian clubs. Juventus’ plans to move to a new stadium are well advanced, while Inter continue to negotiate with their council to move away from San Siro. However, since the 2009 announcement, little more has been heard from Roma about a new stadium, which might be linked to their financial difficulties, though some fans suspect that it was little more than a smoke screen designed to deflect criticism away from the owners.

All in all, Roma’s revenue is not too shabby, but the problem is that it’s not enough to cover costs, leading to a €15 million loss after cash expenses and a €40 million loss after amortisation (and before profit on player sales). As with all football clubs, the largest expense is wages, which have increased by nearly 50% in the last four years from €68 million to €101 million, even though revenue has only grown by 5% in the same period. This trend is most apparent in the last two seasons, when the wage bill steadily grew, even as revenue declined, producing an unsustainable wages to turnover ratio of 82%, which is far higher than UEFA’s recommended maximum limit of 70%.

Admittedly, Roma’s wage bill of €101 million is much lower than their rivals from the north (Inter €205 million, Milan €172 million and Juventus €138 million), but it is still the fourth highest in Italy and around twice as high as the likes of Lazio, Fiorentina and Genoa. Although the payroll has been lightened with the sale of Julio Baptista to Malaga and the loan of Cicinho to Villarreal, the accounts reveal the significant cost of extending player contracts, e.g. Totti’s deal runs to 2014 at €8.6 million a year. Roma fans might also be interested to know that Rosella Sensi received compensation of a tidy €1.1 million, which begs the question of how much she would be paid if the club were actually profitable.

In contrast, player amortisation has held steady at around €24 million in the last three years, which is on the low side compared to other leading Italian clubs: Inter €50 million, Milan €41 million and Juventus €34 million. Remember that amortisation is the annual cost of writing-down a player’s purchase price. For example, Nicolás Burdisso was signed for €8 million on a four-year contract, but his transfer is only reflected in the profit and loss account via amortisation, which is booked evenly over the life of his contract, i.e. €2 million a year (€8 million divided by four years). Thus, the total cost of player purchases is not immediately reflected in the expenses, but increased transfer spend will ultimately result in higher amortisation.

Therefore, the fact that amortisation has not increased would imply that Roma have not spent big in the transfer market and that is indeed the case, at least recently. In the five years up to 2003/04, Roma clearly splashed the cash with net spend of a not inconsiderable €183 million on players of the calibre of Batistuta, Cassano, Montella and Nakata, but they have only incurred net spend of €3 million in the seven years since those heady days.

The annual report explained that the club could only afford “smaller investments, due to fewer available resources” and they have had to box clever, recruiting the Brazilians Adriano and Fabio Simplicio on free transfers (though on high wages) and taking prolific forward Marco Borriello from Milan on loan (with an agreement to buy him for €10 million next season).

This an example of Roma’s need to conserve cash, which is evidenced by the cash flow statement. Over the last two years, the cash outflow of €47 million has been even higher than the reported losses of €23 million, which rings a large alarm bell, especially as this excludes €52 million of amortisation. There have been rumours that the commercial deals were extended at such a low rate in order to get some of the money upfront, but the accounts explicitly mention a number of arrangements whereby TV revenue has been sold in order to access funds now.

"Adriano - a huge investment in both senses"

That sort of arrangement would raise a red flag to most investors, which might explain why the interest of so many possible buyers goes cold when they undertake due diligence and have the opportunity to examine the club’s books in detail. It’s as if they look at the high-level numbers and think that they could make a go of it, but there are too many skeletons in the closet for their liking.

Of course, Roma does possess hidden assets too, namely their players, who were valued at a conservative €42 million in the balance sheet, but are worth considerably more in the real world – a staggering €215 million according to Transfermarkt. Unfortunately, the only way of realising the value of these assets would be to sell players like the popular Daniele De Rossi, which would hardly endear a new owner to the fans.

In addition, any rational investor would look at the market in which a potential acquisition operated, which does not exactly provide a comforting picture. Although Serie A football remains fascinating and continues to produce more than its fair share of Champions League winners, there are numerous problems: outdated stadiums, falling attendances, outbreaks of hooliganism and the complicated “tessera del tifoso” process, which makes it more difficult to just turn up at a match.

"Mirko Vucinic - it's a celebration"

Consequently, Italian clubs have reported some of the largest losses in football. In the last three years, Inter made cumulative losses of over €500 million, while Milan’s losses of €120 million in the same period would have been even higher without the €63 million profit made from selling Kaká. Even Juventus, who have been held up as a paragon of economic virtue in Italy, lost €11 million last year. Future financial prospects have been further damaged by the loss of a Champions League place to Germany.

Of course, Italian clubs will not be able to ignore such losses in the future, even if they have a generous benefactor, as we are entering the era of UEFA’s Financial Fair Play Regulations, which will ultimately exclude from European competitions those clubs that fail to live within their means, i.e. make a profit. These will be implemented in the 2013/14 season, though the monitoring period will cover the preceding two reporting periods, 2011/12 and 2012/13, so clubs like Roma are under pressure to rapidly wipe out their losses.

"The happy couple - but for how much longer?"

Wealthy owners will be allowed to absorb aggregate losses of €45 million over three years for the first two monitoring periods, so long as they are willing to cover the club’s losses by making equity contributions, but the maximum permitted loss then falls to €30 million from 2015/16 and will be further reduced from 2018/19 (to an unspecified amount). Funnily enough, this additional governance could potentially help Roma, as their losses are within this “acceptable deviation”, while some of their competitors will have to slash and burn to get down to this level.

There is little doubt that the right owner, i.e. one with considerable resources and a strategic vision, could make a significant difference to Roma. While it might be over-egging the cake to describe the club as a sleeping giant, it has a lot of strengths that have not been fully exploited, starting with a large, fervent fan base and a productive youth academy. If a new owner could also build a new stadium, and maybe persuade the local authorities to fund improved transport infrastructure, then this sorry saga might actually have a happy ending. Let’s hope so, as the world of football is a better place with a Bella Roma.

Friday, January 14, 2011

Birmingham City Blues

The January transfer window has been a bit of a damp squib to date, with the exception of Manchester City’s big money purchase of prolific Bosnian striker Edin Dzeko, but rumours of possible signings abound. Perhaps surprisingly, one club that has featured prominently in the feverish press speculation is Birmingham City, who have been linked with a series of attacking players in an attempt to resolve their goal scoring problems, including Kenny Miller and Robbie Keane, and have signed David Bentley on loan.

The reason for Birmingham’s activity in the transfer market is clear, as they are currently languishing in 15th position in the Premier League (albeit with a game in hand), a single point ahead of the relegation places. Even though the Blues have proved their usual obdurate selves defensively, particularly at St. Andrews, they have only won four times with their points tally being damaged by an unusually high number of draws (ten).

Realistically, the fans’ hopes should not be overly high, as Birmingham have only won one major trophy, back in 1963 when they beat local rivals Aston Villa 3-1 on aggregate in the League Cup, though they have played in the top tier of English football for the majority of their history. Nevertheless, the team achieved a highly creditable ninth place finish last season, which was particularly praiseworthy, given that this came immediately after being promoted from the Championship.

Great stuff, but this was always likely to be a hard act to follow and, sure enough, Birmingham are suffering from a classic case of second season syndrome, whereby a promoted team that exceeds expectations invariably struggles the following year.

"Alex McLeish - Big Eck"

In fairness, the club’s prospects have been hurt by the long-term absence of James McFadden, exacerbated by the failure in the summer to secure manager Alex McLeish’s preferred striking targets, including Bobby Zamora, Fabrizio Miccoli and Moussa Dembele. As an alternative, he has had to make do with beanpole Serbian forward Nikola Zigic and Chilean winger Jean Beausejour, supported by loan signings Matt Derbyshire and Aleksandr Hleb, and none of these players has had a meaningful impact on the scoring charts.

So they need to do something if they want to ensure survival in the Premier League. When Carson Yeung’s investment vehicle Grandtop International Holdings Limited took over the club in October 2009, it made it very clear that this was the cornerstone of their strategy, “Our aim is to work hard to secure our position in the Premier League, not only this year, but for many years to come.” Nothing wrong with that, of course, as this is the strategy of the majority of clubs in the Premier League, because the financial implications of relegation are too hideous to consider. When Birmingham were relegated in 2006, they warned, “A prolonged absence from the Premier League will force the club to make wide-ranging economies.”

This explains the club’s apparent willingness to reinforce its squad, though there is a degree of confusion over just how much money is available for new players. Alex McLeish first claimed, “We are not in a position to spend at the moment. We are looking at the loan situation and if push comes to shove then we will see.” However, this reticence was later clarified by Peter Pannu, the club’s vice-chairman, “We will consider each request on a need to buy basis, and need to play basis and finally on a need to strengthen the team basis and not on a buy for the sake of buying basis.”

"David Bentley - dreaming of a new start"

It’s a real dilemma for Birmingham: in the immortal words of Richard Keys, do they stick or twist? If they don’t improve the squad, they run the risk of relegation and all that entails, but, on the other hand, if they do splash the cash, they will place an additional financial burden on the club’s threadbare financial resources. Last year McLeish explained his ethos, “There will be money to spend, but there has got to be prudence.” Of course, if the money spent were to result in the club maintaining its place in the Premier League, it would certainly recoup its investment, but this still represents a gamble.

This is especially so in the case of the Blues, as highlighted by the latest accounts for Birmingham City PLC, which were released last week and included the dreaded “Emphasis of Matter” warning, which stated, “These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.” Although some have under-played the significance of this statement, suggesting that it’s merely a case of accountants covering their backsides, the reality is that auditors do not make such remarks lightly, as supporters of Liverpool and Hull City would appreciate. In simple terms, there is a risk that Birmingham City will be unable to pay its bills and could even go bust.

The same accounts make it crystal clear that the club “is reliant on continued funding from Carson Yeung.” Of course, Birmingham are by no means the only club that is dependent on the support of a wealthy benefactor, but the comments on future trading and liquidity emphasise the hand-to-mouth nature of the club’s existence, as “the forecasts show that the Group needs funding of around £7.5 million from its parent company in the short term in order … to continue to operate within its agreed bank facilities.” Even that hinges on finishing in an unspecified position in the Premier League with a further £3 million required if the club avoids going down. There is no mention of what happens in the worst-case scenario of relegation, but we can make a pretty good guess, as the club posted a £19 million loss the last time this happened.

"Hleb - known to Arsenal fans as Dribbly McNoscore"

Even more worrying is the fact that the parent company, Birmingham International Holdings Limited (BIH), does not appear to have this funding readily available, but needs to organise a placing of shares on the Hong Kong Stock Exchange “to provide general working capital and financial support.” Only £7.5 million is fully underwritten (i.e. guaranteed), leaving a further £17.5 million to be raised on a “best efforts” basis. That’s not particularly comforting, especially as the accounts state that the net proceeds “are expected to be transferred by the end of November 2010”, but there has been no further press release from BIH regarding the results of the placing. Instead, the company’s shares were suspended on 5 January, “pending the release of an announcement regarding proposed very substantial acquisition.”

To a certain extent, the warning in the football club accounts is old news for Blues fans, as the BIH accounts published last October contained exactly the same “going concern” statement, while also noting that the Group’s current liabilities exceeded its current assets by around £28 million (depending on exchange rate with Hong Kong Dollar), after incurring a loss of £35 million, though much of this was due to a paper loss from writing-off goodwill arising on the acquisition of the football club. Clearly, the funds from the proposed share placing will be used to shore up the balance sheet, but that means that only limited funds will be available for transfers or stadium development.

At the time, Peter Pannu eased the fans’ fears, “The accounts are those of the holding company and has nothing to do with BCFC, which in the last year had shown profits”, but this is palpable nonsense. Birmingham City Football Club PLC is the only trading subsidiary of Birmingham City PLC, which is in turn wholly owned by Birmingham International Holdings Limited (formerly Grandtop International Holdings Limited). If the chain of ownership is not enough to convince, try this for size: 99.6% of BIH’s turnover comes from the football club.

All of this has cast significant doubt over the viability of the club’s holding company, which is crucial, as the football club is reliant on its support. Birmingham City’s June 2010 balance sheet has net current liabilities of £27 million, while net debt is £14 million. Almost all of this has arisen in the last year, very largely comprising a £12 million loan (bearing 5% interest) from Carson Yeung, though he has promised not to seek repayment in less than 12 months. Since the books were closed, he has advanced a further £2.8 million, so the total owed now stands at £14.8 million. The club also has £2 million of bank loans and a £2 million overdraft, both of which are secured on the club’s land and buildings, offset by £1 million of cash.

So, the club is no longer debt-free, as it had been during the reign of previous owners David Sullivan and David Gold, thanks to their frugal approach. Of course, Birmingham’s debts are not huge compared to other clubs, something that Pannu was keen to announce, boasting that they were “nowhere near the level of some major Premier League clubs and some of the powerhouses in Spain and Europe.” That’s true, even though his grasp of European geography seems rather loose, but the revenue generated by those clubs is considerably higher.

In fact, Birmingham’s debt is effectively higher, as they also owe £13 million to other football clubs for transfer fees, of which £8 million is due in the next financial year. Stage payments of transfers is a fairly common practice, but this is quite a high sum for a club of Birmingham’s size and it has been increasing over the past few years.

They also potentially owe the taxman £5 million on image rights if Her Majesty’s Revenue and Customs win a court case against a number of football clubs. Similarly, the club has provided around £1 million for a VAT dispute.

However, the majority of the debt has come from Birmingham’s recent largesse in the transfer market. People might be taken aback by the fact that Birmingham’s net spend of £36 million over the last two seasons is the third highest in the Premier League, only behind Manchester City and Chelsea. In a way, this is perfectly understandable, as a team promoted from the Championship has to improve their squad to be competitive in a higher division, but it’s still a surprising statistic.

Although Carson Yeung has not quite delivered on his initial pledge to spend £80 million on new players (“£40 million in the January transfer window is my commitment to the Birmingham fans. And next season we put another £40 million into the team.”), this still represents a significant outlay. Of course, boasting about such spending power did not appear to be a wise move from a negotiating perspective and Yeung has since admitted, “In hindsight, I can see that wasn’t the best thing to do. We learned one lesson – that suddenly prices shot up.” Well, they would do, if you show your hand so blatantly, e.g. the price of Roman Pavlyuchenko jumped 50% overnight.

Looking at Birmingham City’s profit trend, we can see why Yeung’s loan was so important in funding the transfer spend. Even though the club was one of a select few to make a profit last season, it was extremely small at £0.1 million, necessitating cash injections. Let’s be very clear about this: Birmingham City have been run very well from a financial point of view, reporting profits in six of the last eight years, but they simply don’t produce enough cash to justify their recent activity in the transfer market.

At its simplest, Birmingham are profitable in those seasons when they play in the Premier League, but make a loss if they drop down to the Championship. In 2008/09, the club took the calculated gamble of retaining most of its players, which paid off in the sense that Birmingham came back up at the first time of asking, but this did produce a hefty £19 million loss. This was in contrast to the approach they took after relegation a couple of seasons before, when they “took immediate action to alleviate the financial implications” by releasing 13 first team squad players in order to cut the wage bill and realise some profit on player sales (mainly Emile Heskey and Jermaine Pennant to Liverpool), though they still had the “highest investment in the division.”

I should note at this stage that the last accounts only cover ten months, as the accounting close was changed from 31 August to 30 June, in order to be in line with the parent company BIH. This probably has limited impact on the revenue figures, as the TV money from the Premier League is distributed during the football season, while matches are not played in July and August. However, costs are booked evenly throughout the year, so a full year’s costs would have been higher than reported.

Despite turnover more than doubling on Birmingham’s return to the top tier from £28 million to £56 million, this is still relatively low for clubs in the Premier League. Even though it’s a different year, if we take the Money League for 2008/09 as a comparison, Birmingham would have been in 15th position or about the same level as Stoke City. To place that into context, Manchester United’s revenue is nearly five times as much, while Aston Villa earn 50% more.

The graph of the revenue mix vividly highlights Birmingham’s challenge with almost all of their income (£42 million) being derived from television, leaving relatively little from the other revenue streams with £7 million coming from each of match day and commercial. The difference between TV revenue in the Premier League and the Championship is by far the biggest swing factor in each year’s revenue. In fact, it has become increasingly important over the years. Note that match day revenue in the earlier years was over-stated in the accounts, as it included “FA and League distributions.”

In fact, 74% of Birmingham’s total income comes from TV, which is only behind Wigan in terms of Premier League clubs’ dependency on the small screen, even though their £42 million is nowhere near as much as the leading clubs earn, mainly due to the money those teams earn from the Champions League. Like others, Birmingham have enormously benefited from the Sky revolution with £41 million of their £42 million broadcasting income emanating from Murdoch’s empire.

The distribution of the Premier League TV revenue is therefore of particular interest to a club like Birmingham. Much of it is shared out equally, namely 50% of the domestic rights and 100% of the overseas rights, but not all of the money is allocated in this manner. Merit payments account for 25% of the domestic rights with each place in the final league table being worth around £800,000, which we have already seen is important for Birmingham’s cash flow. In addition, the remaining 25% of the domestic TV rights comes from the facility fee, which is based on how many times Sky broadcast a club’s matches live. Last season Birmingham were shown eleven times, while the viewing public was treated to Manchester United the maximum 24 times.

As such, Birmingham’s turnover is heavily influenced by the timing of broadcasting deals, with the significant increase in 2008 revenue being partly due to promotion and partly due to the new Sky agreement. Happily for the Blues, they can anticipate a similar boost to revenue in next year’s accounts, as the central payments from the latest three-year deal, which kicked off in the 2010/11 season, will climb by around £7-10 million, largely thanks to the steep increase in overseas rights.

Although the parachute payments paid to clubs dropping out of the Premier league have been increased to £48 million (£16 million in each of the first two years, £8 million in each of years three and four), this would still represent a drastic reduction for Birmingham. They can expect around £48 million revenue from the Premier League this season, so they would have to manage a £32 million reduction in their revenue, which is a big ask to say the least.

The accounts proudly announce that match day revenue increased by £2 million from £5 million to £7 million, though this is partly due to promotion. In a way, this was still impressive, as season ticket prices were reduced by 10%, but this amount is still insignificant compared to most other clubs. If you consider that clubs like Manchester United and Arsenal collect over £100 million of match day revenue, it’s hardly a level playing field. In fact, only three clubs have lower gate receipts: Blackburn Rovers, Bolton Wanderers and WBA.

This is pretty much in line with crowd levels, as Birmingham’s average attendances rising of 25,000 (up from 19,000) were the 16th highest in England last season, partly because only 84% of St. Andrews’ 30,000 capacity is being filled. In fairness, the West Midlands has been stricken by severe unemployment, with many manufacturing plants (notably Longbridge) being closed down and other workers having their hours reduced.

"Big Ben Foster"

The club has invested some money into the stadium in the past, with the accounts specifically mentioning £1 million on refurbishing the main stand in 2008 and £2 million on the ground and training facilities in 2007, but the 2004 proposal to build a 55,000 capacity City of Birmingham Stadium has been put on hold, after the government refused to issue a licence for a super casino.

If the Blues are adversely impacted by low match day revenue, the picture is even worse when it comes to commercial income with only WBA earning less than Birmingham’s £7 million. Again, the “big boys” generate substantially more revenue here with Manchester United and Liverpool receiving ten times as much at around £70 million. Note that the £10 million commercial revenue reported in 2008 was artificially inflated by the £2.5 million compensation received for former manager Steve Bruce joining Wigan.

The shirt sponsorship deal with F&C Investments is worth just £650,000 a season, which compares very unfavourably with the £20 million that Standard Chartered pay Liverpool. In fact, only Blackpool’s deal with the inappropriately named Wonga is lower in the Premier League.

As of this season, the club has signed a five-year deal worth £7 million with Chinese sportswear manufacture Xtep to provide kit, replacing the three-year deal with Umbro. Peter Pannu was proud of this off-pitch signing, “Not only is it a superb deal commercially, being the biggest sponsorship the club has acquired, but also on a brand level, as it promotes the club internationally.”

"Karren Brady - the first lady of football"

This is part of the owners’ long-term strategy, which was outlined after the acquisition, “We believe that there is a major opportunity to build BCFC’s fan base in China and to generate new sources of revenue for the club.” Former chief executive Karren Brady gushed, “I can foresee links with the powerhouse Chinese economy”; while one BIH’s legal advisors went even further, “With a population of 1.3 billion in China, the prospects are unlimited.”

Stirring stuff, but is it really credible? Sure, football is widely followed in China with Premier league matches broadcast on free-to-air state channel Guandong TV, but even franchises like Manchester United have struggled to make any tangible impact there. Indeed, only a tiny percentage of United’s revenue comes from outside the UK. Of course, Yeung has many more local connections, which he believes will lead to Birmingham being “more popular than Manchester United and Chelsea”, but there’s been little evidence of that so far, beyond a pre-season tour. It’s obviously early days in the relationship, but to break through in a major market like China is likely to require the kind of funds that Birmingham do not appear to possess.

Where Birmingham can be justifiably lauded is their cost control. In five years, total expenses have only grown from £45 million in 2005 to £55 million last year, though we should probably pro-rate 2010, as those accounts only cover ten months. If we do that, we get £65 million, which gives a growth of 44%, which is not too bad. As a comparison, Bolton, a club with similar revenue (£56 million), has seen cost growth of 95% in the same period.

Using the same pro-rata technique, the annual wage bill is £44 million, which is one of the lowest in the Premier League at 15th. This means that Birmingham significantly outperformed their expected league position based on wages when they finished 9th. To place their wage bill into context, teams like Aston Villa and West Ham pay 50% more.

This is an area that the board takes very seriously, indeed it is listed as the club’s principal risk in the accounts, “The acquisition of players and their related payroll costs are deemed the core activity risk and, whilst assisting the manager in improving the playing squad, the Board is mindful of the pitfalls that are inherent in this area of the business. The aim is therefore to manage these costs whilst being as competitive as possible within the club’s financial constraints.”

In 2007 wages were cut following relegation, but this was not repeated in 2009 when the club was again demoted, leading to an unsustainable wages to turnover ratio of 100%. This was lowered to 78% last season, due the rise in turnover following the return to the Premier League, but this is still a little on the high side. To be fair, this could fall to UEFA’s recommended maximum limit of 70% with a £7 million increase in revenue, which is entirely possible following the new Sky contract.

The question is what would happen if Birmingham were to be relegated? Yeung has spoken in the past of maintaining a “magic formula of 60-70%” and “a fall-back option in case you are not in the Premiership”, which implies that there would be a sale of players in this eventuality, unless the players’ contracts include clauses reducing salaries in the Championship.

Similar to wages, player amortisation of £12 million is far behind most of Birmingham’s Premier League rivals, who are still “paying” for the transfer excesses of previous years. Amortisation is an “accounting” expense, which occurs as the result of transfer purchases. When a player is bought, the cost is capitalised as an intangible fixed asset and amortised (written-off) over the length of his contract. This means that the costs of buying a player are not fully reflected in the books in the year of purchase, but over time the amortisation costs can have a real impact on the profit and loss account, e.g. Manchester City’s annual amortisation is an astonishing £71 million. Again, for Birmingham, this expense tends to rise and fall, depending on whether the club is in the Premier League or Championship.

The impact that the new owners have had on the club’s transfer policy can be seen by looking at the net spend over the last decade. During the last eight years of the Sullivan and Gold era, this amounted to £41 million, but this has almost been matched with £36 million in the two years under Yeung. OK, a couple of the buys in 2009 took place when the “two Davids” still had their hands on the tiller, but the point largely remains valid.

Many of the purchases, such as defenders Roger Johnson, Scott Dann and Craig Gardner have proved quite astute, while the club has also made good use of the loan system over the years, most notably with goalkeeper Joe Hart from Manchester City last season, but also the likes of Sebastian Larsson, Fabrice Muamba and Nicklas Bendtner from Arsenal.

This is an example of the thrifty stance adopted by the previous owners, Sullivan and Gold, who appear to have provoked contrary reactions in most supporters. On the one hand, they rescued the club from receivership in 1993 when they bought it for £700,000 and they ran the finances in a sensible manner, generating profits in many years, which is a rare feat in the pressurised world of football. On the other hand, they were criticised for milking the fans and not investing more of their own money, leading to two relegations in four years, which many felt could have been avoided.

Indeed, the former regime’s reputation for financial competence has taken a few hits in recent years. In March 2010, Sullivan himself declared, “Last summer we knew the club had a financial problem, as we publicly stated we loaned it £5 million to pay the deposits on two new players, because there was no money to do that.” In the same interview, when confronted with Birmingham’s £19 million loss in 2009, he admitted, “I can’t see where this loss has come from”, even though he had sanctioned the policy of retaining the Premier League squad in the Championship – which, admittedly, was vindicated when promotion was secured.

"Gold and Sullivan - the dynamic duo"

Then, there’s the small matter of a few legal difficulties, including a tribunal finding against the club in 2007 over the issue of reclaiming VAT on agents’ fees, and Sullivan and Karren Brady being arrested the following year on suspicion of conspiracy to defraud and false accounting (though no charges ensued).

While these incidents may have raised supporters’ eyebrows, they were more angered about the size of Brady’s pay-off, when the club was sold. According to the circular sent to Birmingham City shareholders, this amounted to a staggering £959,000, comprising 12 months’ notice £179,000; once-off bonus on company sale £520,000; and a bonus for each season played in the Premier League, starting 2009/10 £260,000.

Indeed, Yeung sued the former owners, as he believed that they had taken too many management fees out of the club, and even though they ultimately dropped the lawsuit, the 2010 accounts did note that the club recovered a total of £2.65 million “relating to management charges incorrectly invoiced to the club in previous years.”

Of course, the old saying caveat emptor springs to mind and it is fairly obvious that Yeung’s due diligence could have been better, especially as this was his second bite of the cherry, having failed to raise sufficient funds in his collapsed takeover bid of 2007, when he had to settle for a 29.9% stake instead. Despite this inside track, Yeung surely over-paid when he finally bought the club in late 2009 for £81.5 million, which was £17.5 million more than Randy Lerner paid for Aston Villa and £58.5 million more than Venky’s paid for Blackburn Rovers (though in both those cases, the new proprietors took on more debt).

"McFadden - absence makes the heart grow fonder"

In this case, Sullivan was right on the money, “He merely asked us about ten questions and failed to bring in accountants or auditors. It’s a bit like me buying a house and failing to conduct a survey and then moaning when the damn thing collapses.”

A similar lack of attention to detail was exposed when Yeung’s company lost a court case to stockbroker Seymour Pierce, who had sued the club for £2.2 million of unpaid fees relating to advice provided in the initial takeover bid, apparently because they had failed to submit three months’ written notice. At one stage, there was talk of this case causing the owners to lose control of the club, which may have been an improbable scenario, but it did raise questions over the strength of their financial backing.

As Seymour Pierce’s lawyer said, “Any reputable business would not choose to be in contempt of a British high court. If they are well funded and they are as substantial as they have told people, they would easily be able to fund the fee and then try to get leave to appeal the judgment.”

There has always been a dichotomy at the heart of Birmingham’s new owners: plenty of bullish talk about money being made available for new players, even though the holding company appears to have little financial substance. Indeed, Grandtop made significant losses in the four years prior to the acquisition and required a £57 million bridging loan to fund the takeover, which was only repaid after a share issue. This was a sign of things to come, as the current working capital issues are once again being addressed via another share placing.

"Nikola Zigic - more bang for your buck?"

If that’s not bad enough, there is also confusion over the identity of the real owner of the football club with some questioning Carson Yeung’s role, leading to a rebuttal by Peter Pannu, “He is not a front man, he is the main man”, though even he admitted, “I can understand why people have made assumptions. The legal documents are very complex and difficult to explain.”

That’s certainly true, but the latest placing document clearly identifies the anticipated dilution of Yeung’s stake that would result from this process. He currently holds 18.54% (in his name 5.82%, wholly owned Great Luck Management Limited 12.72%), which would fall to 16.25% after completion of the fully underwritten element and 12.47% if the maximum number of “best effort” shares are placed.

Apart from demonstrating the lack of confidence in BIH, given that less than 25% is underwritten, this share placing raises a couple of important questions: (a) If Yeung has so much money, why is he prepared to let his stake be diluted, especially as the price is half of what he previously paid? (b) How can he still be the “main man”, when he will own less than an eighth of the company?

In fairness, he would still be the major shareholder, if not the majority shareholder, and it is possible that other large shareholders are close business associates, who are happy to see him to lead the organisation. That said, he sure has come a long way since the days he ran a chain of hair salons, before apparently making money from the ubiquitous “property development” and becoming chairman of Hong Kong Rangers football club.

"The focus of Roger Johnson"

The company’s share placings have been under-written by Kingston Securities, a Hong Kong brokerage owned by Pollyanna Chu, chief executive of the Golden Resorts casino hotels company in Macau and reputedly one of the wealthiest women in Hong Kong. There are suspicions that she is the true power behind the throne, with some believing that it is only a question of time before she shows her hand, especially with BIH’s continual financial headaches, but Pannu has denied her involvement. Such a change might be welcomed by Blues fans, though it could be a case of jumping out of the frying pan into the fire, as she has a somewhat controversial past, having been investigated by the Hong Kong Securities and Futures Commission for “unauthorised and improper trading activities.”

There have been a number of bizarre potential acquisitions announced by BIH, including Peace International Creation Limited (aviation), Diligent King Investments Limited (telecoms) and Good Partners Group Limited (property), though none of these appear to have been completed. Again, it makes you wonder what are the attractions of these unknown companies, when there many businesses around that would be far less speculative investments. As Spandau Ballet once sung, “Questions, questions/Give me no answers.”

In fairness to Carson Yeung, he has so far delivered on a number of promises: the money was found to purchase the club, the bridging loan was repaid and money has been provided to fund transfers (albeit not to the levels initially pledged). That said, the lack of transparency must be a concern for Birmingham City fans, not helped by the club’s parent company being incorporated in the Cayman Islands, an offshore tax haven. The Premier League have been satisfied to date, but their tests only require a guarantee that the club is funded until the end of the season and is not designed to look at long-term solvency.

"Calling Cameron Jerome"

Push will come to shove soon enough, as Birmingham’s ageing squad will need to be rejuvenated and that will require a fair bit of cash. The concern is that the complicated structure is acting as the proverbial smoke and mirrors to disguise fundamental financial weaknesses, while the hope is that the club do indeed manage to break into the lucrative Chinese market and reap the benefits. We shall see.

Encouragingly, Peter Pannu recently stated that Birmingham had to be “financially prudent” and could not be run on a “benefactor’s model” otherwise they would end up like Portsmouth, but he also said that Yeung was not going to “turn off the taps.” It’s a delicate balance that affects all clubs, but many of them do not suffer from the Blues’ Byzantine ownership structure.

In many ways, Birmingham City is an admirable club with solid, down-to-earth principles. They have a small budget, but have continued to punch well above their weight, earning the respect of the Premier League. Much of this is due to a fiercely loyal support that deserves more clarity from the club’s owners. As Peter Pannu said, when talking about the previous administration, “The fans would like to see the lifting of the corporate veil and their club run in a responsible and open way.” I couldn’t have put it any better myself.

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