|TRUST BOARD LOOKING FOR OUTSIDE INVESTMENT
(Wednesday 19th September 2018 - words by Paul Lewis)
Wycombe Wanderers Trust members heard at a General Meeting on Wednesday 12th September 2018 that the Trust Board have been investigating options for bringing outside investment into the Football Club in order to reduce the risk associated with cash-flow problems throughout the season and help fix what was described as an ‘unstainable’ financial situation.
At least three potential ‘investors’ had been in talks with Club officials within the previous 12 months, with options including ‘minority’ and ‘majority’ shareholdings. An informal show of hands from Members at the meeting indicated that a vast majority were in favour of continuing the investigations. However, any change to a ‘majority’ shareholding would require 75% approval from ‘Legacy Members’, with a significant number of those aware of the financial chaos stemming from previous private ownership.
Trust Chairman, Trevor Stroud, addressing close to 250 members at the General Meeting held at Adams Park, plus a further 140 online, first confirmed that any sale of the Club would not include Adams Park or the Club memorabilia. However, Stroud, who is also Football Club Chairman, said: “100% fans ownership for Football League Clubs is, on a long-term basis, a flawed model, as fans will always find it difficult to provide the cash any football club needs to be competitive, year on year.”
Stroud explained the situation in more detail to Members with the help of Group Finance Director Mark Burrell. The Football Club had declared a profit for the three previous seasons, but Burrell pointed out that the profits were attributed to what was described as ‘Football Fortune’, adding: “Football Fortune has seen us avoid major injections of cash thanks to FA Cup runs, the Checkatrade Trophy and player trading, especially Jordon Ibe. But on Ibe, there were contractual terms in place that saw the money used to repay our debt to Steve Hayes, and only relatively short-term help to the Club’s cashflow.”
Burrell, also confirmed that debt for the Football Club had been reduced from around £2.9m in June 2015 to approximately £950,000 by June 2018. £450,000 of this figure related to the ‘Chairboys Funders’ scheme while the remainder was across six different existing loans. No other new loans had been taken out since June 2015.
Accounts for the 2017/18 season are expected to filed at Companies House within two months of the meeting but advanced figures shown to members estimated a loss of around £693,000 compared to a profit of £1.4m in 2016/17. The profit for 2016/17 was boosted by a player trading profit of close to £2m, while 2017/18 saw that figure reduced to a profit of around £186,000. Cup income during 2017/18 was also down compared to the previous season - £535,000 coming into the Club coffers in 2016/17 thanks to a run the FA Cup 4th Round and to the latter stages of the Football League Trophy. The figure dropped to £148,000 in 2017/18 following earlier cup exits in both competitions. All this was presented to emphasise the importance of ‘Football Fortune’ in Wanderers’ financial battle. Without ‘Football Fortune’, Burrell estimated a ‘cash gap’ of around £2m over the next three seasons.
Four options were explained to Members.
1. Carry on as we are
2. A minority share sale - under 50% (partial external investment)
3. A majority share sale - over 50% (greater external investment but still a key role for the Trust)
4. A full 100% sale
Commenting on the ‘carry on as we are’ option, Burrell said: “This relies massively on Football Fortune and is just not a sustainable model. The gamble is so big that cash would “fall out of the sky” that we can’t base a business on this gamble.” He concluded: “There is a real risk whether we could carry on as a football club at all, even though we have managed to keep going for 6 years under Trust ownership.”
The minority share sale would NOT require formal approval by Trust members and was explained by Burrell as: “Most likely through a build-up of shares on a journey over 3 years to give the outside investor a 49% stake in the Club. The Club would issue new shares to the external investors and they put cash in to buy them, phased over that journey.”
But Burrell warned that beyond the three-year investment plan, further cash would most likely be needed from both investor AND the Trust, adding: “This would mean that if a further £1m of cash was needed, it would mean £490,000 from the investors and £510,000 from the Trust and fans. That is something like £460 per Trust Member. Maybe each year. That is a very important point to remember as the only other way would be for the investors to get more shares for an increased investment and so be majority owners.”
The majority ownership option was described as one where the Trust would have less control but also a smaller demand to put cash in - this relating to the percentage of the Club sold to external investors. Burrell explained that the logistics of moving to a majority share ownership would not be simple: “If we went with this instead of a minority sale then there are a host of practical issues to work through as we move from the tight group of three companies to a more distant, formal structure.” The majority option would also require 75% approval of all ‘Legacy Members’ – ‘Legacy Members’ being those who have held a Wycombe Wanderers Season Ticket for at three consecutive seasons and now in their fourth season. The Trust confirmed that all ‘Legacy Members’ were being contacted for confirmation of qualification and numbers – currently estimated at around 540.
The final ‘full sale’ option was likened to the recent sale of Portsmouth Football Club but one that was not currently being pursued by the Trust Board. Burrell commented: “There are very similar good and bad things [compared] to the majority sale but [the full sale] can give the maximum potential for a strong club future and funding under a new owner, but with the potential for downside if the Club were to fall into the “wrong hands”.
Trust Chairman Trevor Stroud went on to comment on the people who had been in discussion with the Trust, saying: “We have at least three potential partners who, after significant due diligence, we feel would be suitable people to be involved with us on our journey. They all offer something different, in terms of their desired approach, and therefore give us options whatever route forward is chosen.”
He added: “They have all been or are involved in Football in some way and understand the challenges of running a lower league football club. I would also re-iterate that all the parties understand that discussions do not involve ownership of Adams Park in any way.”
The latest proposals will set alarm bells ringing for those familiar with the recent financial history of the Football Club. In 2004, the previous Limited by Guarantee company was dissolved in favour of a PLC. In the 8 years under PLC ownership, the Club posted losses in excess of £8m and accrued debts of close to £6m. The Trust take-over in May 2012 managed to negotiate the waiving of £3.9m worth of loans from previous owner Steve Hayes but had to sell-off the Training Ground to raise cash and survive a winding-up order by the HMRC before the balance of the loan to Hayes was paid back thanks to the sell-on fee associated with the sale of Jordon Ibe from Liverpool to Bournemouth in July 2016.
Members at the meeting gave a strong indication of taking the proposals further but many will also be concerned that similar plans were mooted by the Trust Board in February 2014. Back then a sale of 75% was being suggested being negotiations fell flat with the identity of the potential investors never revealed to Trust Members.
Commenting on the need to keep Trust Members informed this time around, Stroud concluded: “We recognise the need for transparency, but we do need to balance this with the need to be able to achieve the best result for the club through confidential negotiations. We are also conscious of the potential these discussions have for destabilising the playing staff at a critical time, so if you don’t hear further news for a while, it doesn’t necessarily mean that nothing is going on!”
Trust General Meeting 12 September 2018 - Notice to Trust Members
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