…but probably won’t be. At least not satisfactorily.
Since the club’s 2010/11 accounts were published last week it has been a topic that has dominated debate in the usual outlets, and even making national headlines with a double page spread in the Mail on Sunday (and later coverage in the Guardian). Last year this blog sought to conduct a comprehensive analysis of the 2009/10 accounts, although in truth that wasn’t entirely successful.
Rather than take a similar approach by dissecting the numbers in detail – much of which is already now publicly available anyway – we’ll take a look at the fallout from the figures and the questions arising. It’s unlikely Blackpool fans will get the answers they want to these questions, but if the club’s owners are determined to build bridges and make amends for this PR disaster, then as much disclosure as possible based on these 10 questions would certainly help.
1. Why was £11m paid to Zabaxe Ltd?
The question that spawned this whole story – quite simply why was this payment made? Initially, the only explanations came from Karl Oyston in interviews given to the Gazette and Radio Lancashire, although the reasons for the transaction appear somewhat flimsy. During the radio interview Karl seemed to imply that this payment was done on the advice of tax advisors for the good of the club and he has now reiterated this standpoint in the interview given to the Guardian’s David Conn – “We have done all this on professional advice. We were advised that if we left the money in the football club it could attract a very large tax bill, which would fall on the football club.”
As a means of avoiding paying a large sum of tax, it was in one sense successful, with the final tax bill for the group of just £108,709. However, in terms of what it means for the football club, not the Oystons’ family assets, the result is a loss of the total £11m, not just the part that may have been taxable had the large director remuneration not been paid. Karl Oyston’s explanation makes sense in terms of being best for the Oyston family, but for Blackpool Football Club it cannot possibly be justified as the best use of this money. The token remark from Karl was to say that the money is “not gone” and can be used in future to benefit the club, but just how would that work…?
2. How will the money from Zabaxe come back into the club?
The simple answer seems to be that it won’t in the long term. The £11m has permanently left the club’s coffers, effectively confirmed by Karl Oyston in interviews given. From the Guardian article, Karl states “The money has been paid to my father’s company, and if the club needs it for the next stage of development, which is to build a new training ground, I am sure my father will lend it to the club interest-free, as he always has over 25 years of ownership.” The operative words in that statement appear to be ‘if’ and ‘lend’. Therefore there is no guarantee that the money will come back into the club, and even if it does, it will be in the form of a loan which would need to be repaid. Despite the fact it is the club’s own money in the first place.
The article in the Guardian further supports the idea that it is unlikely the club will even see the money in the form of a loan. David Conn continues by writing “Blackpool’s coffers will fill again this year whether the club win promotion or not – they are enjoying the first year of massively increased parachute payments from the Premier League’s £3.5bn 2010-13 TV deal: £16m for each of the first two seasons after relegation, £8m for two after that. [Karl Oyston] does not think, therefore, that in fact the club will need any of the £11m back for the training ground, which he believes will cost around £5m, an upgrade from the ragged Squires Gate site largely unchanged since Matthews ran around on it.”
So essentially, the money would appear to be gone, never to re-appear. Karl Oyston’s weak reasoning is half right, half wrong. Correct in that it probably was motivated by, at least in part, tax planning reasons. Incorrect however, in that this will help the football club now, or in the future. That £11m is now solely Oyston money and the size of that payment should concern every Blackpool supporter with any concern over the long-term future of the club.
3. Was the £11m remuneration budgeted for before start of 2010/11 season?
One wonders at what point during 2010/11 it was decided that such a large sum would be taken out of the club and paid to Zabaxe Ltd. Perhaps it was the moment the final whistle went at Wembley, or it could have been shortly before year end at which point it would have been clear a sizeable tax bill would have been payable. The amount of exactly £11m also throws up a few questions in that if the aim was to remove all tax liability from the club, then a larger director payment would have done so.
When drawing up a budget at the start of the season, was it known that a figure would exit the club through Zabaxe Ltd with the amount to be decided at a later date, and is it something that may even be repeated this fiscal year with turnover likely to exceed costs significantly once more – with £16m of parachute payments and player wages likely to have fallen, a pre-tax profit (director payments excepted) of around £10m is highly imaginable – in fact when net transfer income is taken account it may well be closer to £15m. Will there be another large director salary for ‘tax reasons’ in the 2011/12 accounts?
4. Why was the wage bill lower in 2010/11 than in 2009/10?
The decision not to throw silly money at players’ wages upon promotion to the Premier League was laudable in theory, it really was. And the strategy very nearly succeeded, with Blackpool proving that teams can prevail on occasion with a much inferior budget. However, the facts show that spending on the wage bill during the Premier League season was actually less than it was for the season prior in the Championship. It’s true that these figures are heavily skewed by the £5m bonus awarded for winning in promotion in 09/10, but even so it is a remarkable statistic.
One of Blackpool’s biggest rivals in last season’s relegation battle were Wigan Athletic, and while the Latics have had the benefit of several years in the top flight, they paid over £39m in salaries, with no director remuneration. West Brom, who won promotion at the same time as Blackpool, had a wage bill in 10/11 in excess of £38m. Investing in the playing squad to the extent their rivals did would perhaps be going a little too far – although the club would still more or less have broken even if the £11m director payment had not been made – but competing with clubs with wage bills more than three times larger showed how difficult life was made for Ian Holloway.
This is not to say more money being spent on the playing side would necessarily have saved Blackpool from relegation, but given how disastrous the January transfer window turned out to be, even an extra bit of investment would surely have meant Ian Holloway would not have had to turn to players in James Beattie, Andy Reid and Sergei Kornilenko who were clearly never his first choice targets and led to the Seasiders’ eventual relegation. There are clubs who go overboard on player spending, but Blackpool were sadly too far to the other extreme and it is frankly a miracle on behalf of the coaching and playing staff that ‘Pool were ever even close to staying up.
5. Why was the old Tangerine Nite Spot land sold to an Oyston-owned company in 2007/2008 for £650,000 and bought back during 2010/11 for £6.5m?
Another contentious issue emerging out of the latest set of accounts was a land deal involving the old Tangerine Nite Spot land on Bloomfield Road opposite the South stand – now of course the site of a Travelodge. It was a controversial, although little known, deal when the land was first sold by Segesta Ltd (then Blackpool Football Club Properties Ltd) to a company owned by Owen Oyston. In fact, although the deal had been agreed years earlier, the sale of the land didn’t go through until 2007/08 due to concerns believed to be related to whether the land was being sold at fair market value at £650,000.
Not long after the land was sold to Owen Oyston, a hotel was built on the land, presumably on a long-term lease agreement with Travelodge. Now, less than five years later, Segesta Ltd has bought the land back from Owen Oyston for £6.5m – paying 10 times what it was originally sold for. A deposit of £4,899,000 was paid during 2010/11 with the final balance being completed in August 2011. One has to question how this deal actually benefits the club. Effectively the club has paid Owen Oyston £5.85m to develop the land, when surely the actual redevelopment figure would have significantly lower. With Segesta Ltd selling low and buying high, it’s hard to see how this land deal has been good for anyone other than Owen Oyston.
Karl Oyston has claimed that it cost his father £5m to build the Travelodge and that the club did not have the money to develop on the land itself, but how realistic this figure is, and whether it can be proven by the Oyston family is up for debate. Furthermore, with the promise of an interest free loan should the club need money to develop a new training ground, why was a loan not arranged in this instance, with the money being paid back through the rental stream, rather than through the sale and purchase transactions?
6. Will revenue from rental of the Travelodge benefit the club?
Aside from the transactions involving the sale and re-purchase, many other questions remain regarding this land deal. One important detail is to note how the purchase was funded. Blackpool Football Club Ltd was the major revenue-generating side of the group in 10/11, mainly due to the central Premier League television deal which pocketed ‘Pool just over £39m. The football side loaned the properties side, Segesta, over £11.5m in 10/11 which was used to fund investments in Bloomfield Road itself and, it would appear, the acquisition of the Travelodge land.
Now that the land has been brought back into the group, there is the little matter of the income generated from rental to Travelodge and where that goes. Clearly the club has already missed out on around five years of rental, but what happens to this income stream now is unclear. It is to be hoped that rentals as of the date the land changed hands will go to Segesta Ltd, but how will this benefit the football side of the business? One scenario might be that the rental will go towards paying off the loan Segesta took from the football side, with the full repayment likely to be well in excess of 10 years. But what would happen once the parent company pays off the loan? Will the football side continue to receive income from the land rental, or will it then go to Segesta, who may, or may not, invest it in the club’s infrastructure?
7. Why was this investment in the Travelodge land deemed to be a more urgent priority than other capital investments?
Clearly one of the most exciting things about winning promotion to the Premier League in 2009/2010, aside from seeing Blackpool compete at the highest level for the first time in 40 years, was the potential legacy that could be earned in terms of infrastructure. The vast sums of money should have ensured that the infrastructure at the club would be first class, especially as it was made clear that investment in the playing squad would be kept to extremely modest levels. Initial signs were surprisingly positive – the East stand, although not an ideal long term solution, rose quickly and was only a couple of weeks behind a very tight and demanding schedule. The rust issue affecting the North and West stands was addressed, the club shop refurbished and a new electronic turnstile system was introduced.However, plenty of improvements were overlooked too.
Roof cladding under the walkway behind the West stand is missing or in a poor condition. Faded seats in the North and West stands were not replaced as promised. The Seasider bar took an age to be completed, not opening until almost a year after the South stand itself opened. Required investment in the pitch was not forthcoming and undersoil heating has never been installed. Meanwhile, supporters have had to reach into their own pockets to purchase signage for the stadium and raise funds themselves for the Jimmy Armfield statue.
And perhaps most importantly of all, a training ground fit for purpose seems no nearer to completion. Yet despite a lack of advancement in these areas, money was ring-fenced from the first year of the Premier League windfall to buy a plot of land which will have no immediate impact for the good of the club. Was it really the most sensible use of the money at that time?
8. Why is there still no tangible progress on a new training ground?
The claims from Karl Oyston that the money paid into Zabaxe Ltd isn’t gone, and can be used if and when necessary for investments such as a new training ground, ring hollow. The simple fact is that a new training ground is years, if not decades, overdue. Ian Holloway, who has not come out of this episode particularly well by saying that fans have no right to question what goes on at the club they love, was a big advocate of a new training ground when he first joined the club in 2009, even going so far as to say “We are never going back to our training ground again. Every player this club has ever had hates it, and every player we have is frightened of it. It is a horrible environment to work in.” Just the sort of area where one would expect immediate investment upon winning the Premier League jackpot then, right?
Sadly that does not appear to be the case and almost two years down the line from Blackpool’s Wembley win, the club are not even as far as submitting a planning application yet, let alone having facilities ready and worthy of a Premier League or Championship team. One has to wonder what is taking so long to replace the antiquated facilities once blasted by the team’s manager as a “hell hole”. Communication is again the club’s worst enemy with no real update at any point other than to say that they are “working on it”. The real question is: are they? Is there an appointed project manager? Do they have a plot of land ready to purchase or lease? What are the timescales?
Sadly none of this has been made clear and thus supporters are left to assume the worst. Karl Oyston has been open and on-the-record about the fact he doesn’t understand why a new training ground is important to fans, and this attitude only serves to antagonise the supporter base further. Regardless of what Karl Oyston thinks, working conditions do have an impact on happiness in the workplace and with the resources that should be available, a modern training ground should be another string to the bow alongside the manager and the team spirit when attracting players, rather than being something of which to be ashamed.
9. Why has progress been so slow on the South East corner?
Compared to the near-glacial progress of a new training ground, the South East corner has positively shot up, but it has still taken an unacceptable amount of time to complete. Construction work started in the summer and it was initially believed the corner stand would be ready for the start of the season, or shortly thereafter. Fastforward to March 2012 and the project has now been ongoing for nine months, with an opening date still not in sight. With less than two months of the regular season remaining, it’s likely that the stand won’t be operational until next season, meaning a corner stand adding just 500 seats to the overall capacity will have taken a whole year.
In order to understand the thinking behind this, it’s perhaps worth examining whether the stand was built for football reasons, or ancillary purposes. Clearly the new corner stand will incorporate the reception for the new Blackpool FC Hotel Ltd, the manager of this venture being a third generation member of the Oyston dynasty, Sam. The corner stand will also incorporate a fire escape for the hotel, the lack of which has prevented the facilities in the South stand being used for matchday hospitality. Just as with the Seasider bar, it appears that the club are in no rush to complete facilities deemed non-essential, whereas the East stand construction flew by as necessitated by Premier League standards.
However, it’s important to remember what the knock-on effect of this significant delay is for certain fans. Many supporters had season tickets for the East stand but with construction work ongoing have had to be relocated all season, an inconvenience that shouldn’t be overlooked. The building work has also restricted the capacity of Bloomfield Road, with many floating supporters put off when struggling to buy tickets together. When the East stand was constructed, workmen were always visible on site but the South East corner has been a stop-start build with seemingly little in the way of effective project management – an Oyston hallmark.
10. Why has the club managed various construction projects through Oyston-owned companies?
In addition to the £11m payment to Zabaxe, and the £6.5m Travelodge land deal, money also seems to be leaving the club through a variety of other Oyston-backed companies. Promenade Construction Ltd, Promenade Interiors Ltd and Promenade Developers Ltd are three of these such companies and appear to be responsible for project managing any re-development at Bloomfield Road. The question is, why is an Oyston-owned company necessary as a go-between for the club and sub-contractors doing the work? The common belief is that all the work is sub-contracted, in which case what expertise do these companies, whose sole purpose seems to be working on football club-related projects, possess to add value, and presumably earn a cut for themselves?
It is a matter of simple economics that the more middle men involved in a particular deal, the more expensive a project will be. Why does Segesta not simply sub-contract the work itself? The current set up does nothing to offer transparency and feeds the idea that these various construction projects end up costing more than they should do. Furthermore, when these Oyston-owned companies have a proven track record of significant delays and long construction times, why does the club keep going down this route if not for financial benefit of the Oyston family? If a middle man is to be used, surely it would be worth the premium of employing an external experienced project management company or contractor to ensure work is completed as quickly and as professionally as possible?
All in all, this is a deeply unsatisfying and disappointing situation. At a time when the club should be enjoying its best years and maximising the gain from the Premier League windfall, the club doesn’t really seem to have progressed all that far off-the-pitch. On-the-field showings remain strong and Ian Holloway continues to do a largely fine job under tight constraints, but the lack of progress in key areas is frustrating and only amplified by the lack of communication. The poor attitude is best summed up by Karl Oyston himself, who said in his interview with the Guardian “But frankly after the way he has supported the club all these years, if it was an £11m salary to my father, so what?”
Those trying to justify the Oystons’ actions will no doubt point to clubs in crisis like Portsmouth and suggest Blackpool fans should be grateful for their lot. However such comparisons are disingenuous and are irrelevant to what is happening at Blackpool Football Club. Quite simply the club does not seem to be getting the most out of its circumstances while the Oystons take money in a variety of ways out of a club at the heart of the community, and as such the supporters have every right to be critical until acceptable answers to the above questions are forthcoming.