Sheepshanks unveils Town rescue plan
By Duncan BrodieIPSWICH Town chairman David Sheepshanks set out last night a three-point action plan to revive the financial fortunes of the football club.
By Duncan Brodie
IPSWICH Town chairman David Sheepshanks set out last night a three-point action plan to revive the financial fortunes of the football club.
In his most in-depth interview since the Blues went into administration, Mr Sheepshanks said the three measures would be vital to the future prosperity of the debt-ridden club. They are:
n reducing the annual players bill to about £5 million from its high last season of £24m
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n raising money from the sale of players
n refinancing the club through a share issue.
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However, the club first needs to achieve a Company Voluntary Arrangement (CVA) with its creditors, allowing it to resume normal trading.
If an agreement cannot be reached, the existing football club would fold and a new company would be created, although there is not serious threat of football no longer being played at Portman Road.
Speaking exclusively to the East Anglian Daily Times, Mr Sheepshanks said Town's wage bill of £24m ranked 15th among the 20 clubs in the Premier League last season and was well below the average for the top flight as a whole – despite the team having finished fifth the previous year.
But the financial gulf between the Premiership and Football League meant such a wage bill was now "untenable" and a substantial reduction had already been achieved, although more remained to be done.
By the end of next season, when Town's "parachute" payments following relegation would come to an end, the figure would have to be brought into line with the average for Division One of between £2m and £5m – unless the club won promotion.
Mr Sheepshanks stressed while the wage deferrals negotiated with the players' union, the Professional Footballers' Association, were welcome and were of major assistance to the club's cash flow, they did not represent a wage cut as the contracts remained payable in full.
He added, given the depressed state of the transfer market, a reduction of the wage bill was not entirely in the club's own hands as many players were on long-term contracts.
Mr Sheepshanks said a major factor in that was the Bosman ruling which, during the 1990s, gave players the right to leave on a free transfer at the end of their contracts.
As a result, it became the new wisdom for clubs to keep key players under contract at least two years ahead to protect their transfer value.
But with the transfer market having receded last summer, that wisdom had been "stood on its head" and the contracts were now liabilities – extreme liabilities in the case of clubs relegated from the Premier League.
Despite the decline in the transfer market, Mr Sheepshanks said it was still necessary for Ipswich Town to raise money through player sales, although he declined to speculate on who might leave and for how much.
However, unless the club won promotion this season, there would definitely be "significant" changes this summer, said Mr Sheepshanks.
He added: "It is a fact of life in football that some favourites go and new favourites emerge".
There would have to be a fine balancing act between keeping certain players to build the team around and the absolute need to control the wages bill.
However, one of manager Joe Royle's skills was building teams in tough market conditions, he said, and once the club's finances had been stabilised, there would be a prospect of some players being brought in a free transfers.
The significance of the new transfer deadline should not be underestimated, he added, as without this the negotiations over the possible sales of Matt Holland and Hermann Hreidarsson at the start of this season might otherwise have continued.
The third strand of the strategy for reviving the club following a successful CVA, said Mr Sheepshanks, would be a share issue to replace the working capital eroded as a result of its current financial difficulties.
New shareholders – who would hopefully include new investors as well as existing ones – would have a significant stake in the company and a special meeting would be held at an early stage to elect a new board, added Mr Sheepshanks, although he declined to speculate on the future line-up of directors.
The immediate priorities, he said, were for the club to come through administration and then to raise the capital.
Mr Sheepshanks was reluctant to discuss the CVA negotiations in detail, but said the delay in producing the document setting out the restructuring of the club's debts was not unusual and was not a sign of anything "untoward".
He acknowledged the club's league position, outside the promotion play-off places, was a factor and if Town were in Leicester City's position in an automatic promotion spot, the process would easier.
The CVA will be structured so unsecured creditors receive a small initial payment, but with the prospect of a further sum in the event of promotion within a certain timescale.
Mr Sheepshanks added Ipswich Town retained hopes of winning promotion this season and even if that was not achieved, there was no reason why the club could not be successful again in the future.
He insisted the club had been well run and although the directors took responsibility for its problems, the decisions they had made had been reached properly, taking into account the circumstances at the time.
In particular, the record of former manager George Burley had warranted the funding made available for strengthening the squad, even though key signings made in the summer of 2001 had not worked out.
Mr Sheepshanks also defended the decision to build the second new stand last season which, even this season, was enabling the club to accommodate larger crowds than would otherwise have been possible – generating perhaps £2m extra revenue in the process.
The 25-year bond by which the stadium improvements were funded was affordable, even on a pessimistic assumption on attendances – an average of just 8,000, compared with an actually low of 11,000 in 1996 – and the ground was now an asset which would hold the club in good stead for the future.
Mr Sheepshanks also defended the appointment chief executive Derek Bowden last year, which was intended to free the chairman from a full-time role at the club – although the financial problems meant that had not in fact happened and he continued to work there full-time.
Mr Sheepshanks said the club's academy for developing young players – which costs about £1m a year to run – was as "ringfenced" as any part of the business could be.
Against the running costs, players produced by the academy had yielded £18.5m in transfer fees in the past five years – in addition to the saving in transfer fees represented by young players graduating to the first team.
However, Mr Sheepshanks added the club was investigating other ways of funding the academy, possibly through a charitable trust which would also embrace the club's community activities.
Mr Sheepshanks said he could not put a figure of the club's total debts and any such figure could be misleading as it would include the sun outstanding under all player contracts and the £25m bond.
He repeated his claim, made at the time of the administration order in January, that the club had been relegated at the worst possible time, with the normal way for clubs to address their new financial circumstances – player sales – simply not available in the current transfer market.
While acknowledging the hardship faced by creditors as a result of the club's problems, he added: "We are not in this position because the directors have done anything in a foolhardy way.
"We have never taken on liabilities which we did not genuinely believe we could fulfil – that's what hurts."