The financial case for fan ownership

There’s been a lot of stuff on social media and podcasts over the last few weeks suggesting that the issues we’re currently facing with regard to the financing of the new stadium are proof that our fan ownership model is no longer fit for purpose and that it can’t take us any further.

Those voices have intensified in the week since the Dons Trust’s SGM on December 9th, when former Chief Executive Erik Samuelson stood up and said that we’re losing £1m a year under our current operating model. He was swiftly followed by Iain McNay, a director of AFC Wimbledon plc, who gave a speech claiming that fan ownership wasn’t working at Wimbledon, was being ditched by all other clubs around the country and that it would inevitably end up with us back in non-League. The £1m per annum loss figure has since been quoted widely on social media as a reason why we need to sell out to the three unnamed investors. 

I’d like to challenge those viewpoints.

The seven sets of AFC Wimbledon PLC accounts published since we got back into the Football League in 2011 show that in the seven seasons from 2011/12 to 2017/18 we made total losses of just £1.8m (or £250,000 per year). Moreover, £1.1m of that total was an exceptional one off payment made to Kingstonian in 2016/17 in order to end their tenancy agreement at Kingsmeadow. That actually makes our “business as usual” losses an average of just £100,000 per year during a period in which we initially sustained League Two football and then got promoted to League One. All of which took place at a sub-5,000 capacity stadium with few revenue generating facilities.

Moving up to League One football in 2016/17 has definitely put a much greater strain on the ability of the club to break even. Staff costs in 2017/18 were £3.79m, an increase of £1.2m in the corresponding amount for our League Two promotion campaign in 2015/16. However, turnover did increase by £1m over the same period, despite the limitations of Kingsmeadow.

Those results also need to be placed in the context of us trying to deliver the new stadium, and the associated one off payments that we’ve incurred over and above the payment to Kingstonian. These were clearly set out in the published 2017/18 accounts:

“Turning to our day-to-day finances, the underlying result was an operating loss of just under £500,000, a figure which includes expenditure on preparations for the new stadium. In the year this expenditure amounted to just over £200,000, made up of employment costs and investment in systems as we gear up for a much bigger operation, repairs that were required as part of the sale of the stadium to Chelsea FC, and sundry other items”.

All of the above evidence shows that our current model is a strength not a weakness. In fact, it’s precisely that argument that was made by Erik in his Group Strategic Report section of the 2017/18 accounts:

“Were it not for this expenditure (the expenditure on the new ground), we would have a deficit on our profit and loss account of less than £200,000 in achieving League One status. To put it another way, for a fans-owned, self-funded club to be on the verge of moving into a new stadium, having climbed from the base of the football pyramid to League One, all in a financially sustainable way, is something to be celebrated”.

So what’s changed in Erik’s mind for him to now be saying that we’re losing a million pounds a year under our current model. We can only presume that the soon to be released 2018/19 accounts will show that a seven figure loss. However, note this line from Erik at the end of the 2017/18 accounts:

“expenditure on preparations for the new stadium will accelerate in FY 2018/19”.

The AGM will give us the opportunity to review the 2018/19 accounts in detail, but that line suggests that – as for both 2016/17 and 2017/18 – our sound day-to-day finances are going to be impacted by one off spending associated with our new stadium. A project that’s specifically designed to strengthen those already sound day-to-day finances. Again, here’s Erik, this time in the South London Press in March 2018:

“We will be able to accommodate more people and confidently expect crowds to be up by 50 per cent. The experience of other clubs has been that, ours will probably go higher but we budget 50 per cent because that’s the prudent level. But we will also be able to generate from non-football activities, which we can’t do at Kingsmeadow. The bars there are fine but they are basic. We will be able to have a sit down meal for 500 people in the functions area. There will be the ability to hold large weddings, conferences, banquets and even wakes. It will be fantastic. We will be able to generate a substantial amount of income which isn’t realistic at the moment.”

Yes, there’s no getting away from the fact that the major funding gap threatens those new revenue generating opportunities. But that makes it even more imperative that we focus solely on resolving what is a one off funding gap for an infrastructure project that will allow us to become even more self-sustaining.

The solution to that issue isn’t getting rid of an operating model that has served us so well over the years and which has ensured that we grow steadily and prudently. The reality is that by doing that we lose all control of club expenditure and responsible ownership. That in turn exposes us to overreliance on an individual owner (however good their initial intentions are), unserviceable debt, owners passing on debt and rogue owners. If you’re still not convinced by that argument, have a look at the realities of non-fan ownership amongst some of our Football League competitors in recent years.

Bradford CityAnnual losses of £2m in both 2016/17 and 2017/18.
Bristol Rovers£3m losses (£65k a week) for both the 2016/17 and 2017/18 seasons. Currently up for sale.  https://www.bristolpost.co.uk/sport/football/football-news/bristol-rovers-accounts-show-club-2926531
Doncaster RoversThe club lost over £2m in both the 2015/16 and 2016/17 seasons.
Fleetwood TownLost £2.2m in 2017/18. They made a profit of £4.48m the year before, but that was due to a £7m cash injection from the owner. https://www.blackpoolgazette.co.uk/sport/football/fleetwood-town-fc/2m-loss-in-latest-fleetwood-town-accounts-1-9127456
FranchiseLosses before taxation of £1.74m in 2016/17 and £4.48m in 2017/18.
Oxford United2017/18 was the sixth time in seven seasons the club has been in the red – five of which have been more than £1m. And they don’t own their ground.  https://www.oxfordmail.co.uk/sport/17545517.football-finance-expert-gives-verdict-oxford-united-accounts/
Peterborough UnitedOverall losses of £3.5m for the period 2014/15-2016/17. As at end June 2017, they owed their owner – Darragh MacAnthony – over £6m in loans. https://www.peterboroughtoday.co.uk/sport/football/posh/latest-news-peterborough-united-lose-close-to-1-4-million-but-there-s-a-big-improvement-in-some-areas-1-8271221
Rotherham UnitedChairman Tony Stewart had to put £2 million of extra money into Rotherham United during 2017/18 by raising the sponsorship contribution of his company from £1m to £3m. The club made a pre-tax loss of £510,000 in 2017/18, compared to more than £1.2m in 2016/17. https://www.rotherhamadvertiser.co.uk/sport/view,rotherham-united-unveil-club-accounts-for-201718_30900.htm
Southend UnitedOperating loss of £2.98m in 2017/18 and £2.1m in 2016/17. Have been the recipient of two winding up orders so far this year.
Coventry CityOwned by a hedge fund which specialises in taking over distressed companies. Operating losses of £1.6m in 2017/18 and £1.1m in 2016/17. As at end 2017/18, owed £16m to owners SISU. Currently playing home fixtures at Birmingham City. https://www.coventrytelegraph.net/news/coventry-news/coventry-city-accounts-ricoh-row-15917064

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