Friday, 18 November 2011

Board announce bumper profits......... What next?




In the yearly shareholders report - the Scunthorpe United have announced that over the last financial year: the club made a bumper profit.

Throughout the financial year of 2010-2011: the club made a tub-thumping £1.4m profit stretching from the year 1st July 2010 - 30th June 2011.

This includes the sale of Gary Hooper - although don't be naive enough to think that without such sale, the club would have lost £1m. Not all of the money has been received from Celtic yet sadly, and even less had been by the end of this financial year.

Why it had taken so long to release the figures is also anybody's guess. Accountants eh?!

The current level of transparency from the club is of course appreciated, but if they really want to be whiter than white: this level needs to be increased. It's what the fans deserve.

The profit level of just more than £1.4m is nonetheless extremely welcome, and more than counteracts the previous "loss" of just less than £500k.

That said - it is in the club's interest to make the bank balance sheet look as unhealthy as possible. The lower the profit, or the greater the loss - the less has to be paid to the tax man.

We are not stating that in any way, shape or form have the club used accountancy rules creatively to boost the club's financial status. But frankly - if they aren't, they need better accountants!

This profit is also despite "Wages & Salaries" having topped £5m for the first time in the club's history.

Certain individuals and circles would have you believe that this means that over £5m was spent on just the squad's wages. Again, this is not true.

Notice the term: "Wages and Salaries". The devil is in the detail. 

So it won't just be the players taking home this barrel of cash. In fact: it will go to all the catering staff, the cleaners, the turnstile attendants, the ticket office staff, the coaching staff, the chairman, the board, the coach drivers. Literally - anybody who draws a salary from Scunthorpe United Football Club. Not just the players!

Furthermore, this will also be including the fact that the club paid off Manager Ian Baraclough, Assistant Manager Kevin Pressman and First Team Coach Steve Parkin.

So the club will have effectively been paying the wages of 2 coaching staffs for a significant stretch of the season. This is not a cheap process, let alone for us.

So whilst the heralded £400,000 rise sounds like significant playing squad investment on paper - view all the materials with a pinch of salt. Especially since the above is likely to be a big contributor.

Furthermore, the last year's profit means that over the last 5 years: the club have made a profit just above £2,000,000.

The club also tried to put cold water on hot coals by saying that for the current financial year, a significant loss is expected.

This may well be the case, and General Manager David Beeby pinned this down to the fact that £3.7m of revenue has disappeared from the club overnight following the Iron's relegation from the Championship.

This is specifically designed to promote calm, and to minimise the calls and appetite for another round of spending from the football club in January. Although, with the club currently underachieving and sat in 17th place - something patently needs to be done.

But this very figure of evaporating revenue and expected loss as a result, is the club's greatest weakness.

As a result of just being in the Championship - the difference in payments from the League, (through TV rights etc), is a stonking £3.7m higher than when you're in League One.

And this figure doesn't even cover the decreased variable revenue the club will suffer from. Hard to judge before a season starts, but it doesn't take a rocket scientist to figure out that: fewer home fans, fewer away fans, fewer season tickets, forcibly reduced ticket prices, less cash spent in the club shop, and less on refreshments - will not bode well for the club's finances.

So set the figure even higher. Saying it's cost us more than £4m is a fairly conservative estimate.

Appreciated that converting the Doncaster Road End to seating would have cost the club cash - but it would have been a price well worth paying: both morally and financially, for staying in the Championship.

Let's analyse the sale of Gary Hooper.

Scunthorpe United's Gary Hooper (left) celebrates after scoring the opening goal with team mate Martyn Woolford (right)

His sale almost certainly cost Scunthorpe United relegation. Even before we look at the substantial damage that the departures of Paul Hayes, Grant McCann or Matt Sparrow cost us - let's deal with Hoops. The Iron finished just 5 points, (and a worse goal difference), shy of Championship safety.

Are we really saying that the services of Gary Hooper wouldn't have earned the Iron another 6 points over the course of the season? Of course he would.

So - that's be an extra sizeable dollop of cash in the Iron's bank account for the coming financial year.. And alright, we might not have kept Adkins anyway: but if Hooper stays - then who knows, might Sparrow, McCann & Hayes too? And not at the increased wage offerings they received elsewhere?

And the financial analysis is flawed.

Because with Hooper there - you can chalk off the club having to sign another player with the fee & wages that come attached. Let alone the fact that 2 strikers came in on loan in February - as the club desperately tried to find some goals.

All for just telling Celtic to bugger off for 12 months.

And alright, his contract was up - but had he gone to a side in England: we'd have received a bumper fee off a tribunal anyway. And with another 15-20 goals in the Championship, the Premier League is where he's off. The SPL wouldn't be in his league.

And it's just not the same as cashing out £1m+ on players in the hope of a miracle. But honestly: we were dismantling the perfect system. And needlessly.

All for that message to the shareholders of a bumper profit.

But let's not hear that usual "the club must be a business"  argument either. We're not Tesco's for christ's sake. 

The club has so much more to give than that - and all the above measures would have ensured the club was financially sounder over the short and medium term anyway.

Nobody is asking to run into the red - but dancing throughout 7 figures of black with no long-term aim is ridiculous. And costly.

Whereas now, we're sat in the bottom 3rd of League One, set to make a considerable loss for the next year - and merely with our memories to console us of what might have been.

And all in the name of that whore prudence.

Penny wise - pound foolish. That's exactly what it is.

So anybody who's lucky enough to be attending the Shareholders' Annual General Meeting, (AGM), on Thursday December 8th, (7:00pm) - might want to bear this in mind.

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