The financial worth of the club, and the Trust 20%

So. Following on from page 12 of the GAS board thread, I've been wondering about the financial worth of the club.

I think it's important to differentiate between the 'value' of the club and it's 'financial worth'. It's semantics on my part, but I take 'value' to mean something more than/other than money. Every one of us here, even the Greeks, place a value on the club. We value the club for the joy and pleasure it brings to our lives (okay, maybe not actually that but we all have an intangible emotional investment in the club - all Argyle fans do... we're all 'stakeholders' if you like - else we wouldn't bother being a part of this forum), the Greeks value the rivalry it affords them and the city itself places a value on having a Football League club - not all of its citizens, sure, but why else would PCC stump up for HP if it didn't see the value of PAFC?

Then there's the economic value of the club to Plymouth and surrounds. For example, if there was no club, Ivor's wouldn't sell however many thousands of pasties they sell every season from their vans, so they wouldn't need as many employees, those employees wouldn't spend their wages on other local goods and services and so on... I'm sure this was 'done to death' during the admin period, and I'm equally sure no one needs another A-level economics lecture.

‘Financial worth’, then. As ChrisWebbFanClub said on the GAS Board thread, the club would appear to have very few assets, its one asset of truly tangible worth – the ground – now owned by the Council (and personally I’m glad about that).
What I’m not sure about is whether PCC now owns all of the land – the hotel car park and the training pitch. Regardless, the car park must be earmarked for JB’s hotel, whether he leases the land from the council or owns it outright.
So if/when the hotel is built, that negates the development ‘worth’ of the car park.

As CWFC said, in terms of assets, what we’re left with is the playing, management and coaching staff and their financial worth on the transfer/football market. And whether or not we think they are not good enough to perform their roles in this league is irrelevant, they still have a financial worth.

Away from tangible assets, there’s the revenue the club brings in which, I suppose, could be used to calculate the club’s worth. I’m sure I read that the club will operate at a loss this season to the tune of a million quid, although that might have come from Ridsdale during early admin so pinches of salt all round.

However, for argument’s sake, let’s say we stay up this season. Next season the club can probably count on, say, three thousand season ticket holders, a few thousand POTDers per game, shirt sponsorhip, match sponsorship, advertising, corporate hospitality, merchandise sales, TV money (if that’s not already accounted for with repaying the debts of Mastpoint, as I believe was suggested although that may be wrong).

I’d argue the above income would only cover the running costs of the club competing in League Two next season plus repaying outstanding debts, principally to the playing and non-playing staff. And maybe it wouldn’t even cover them, so again we might be looking at the club trading at a loss. If, as we’d all hope, there was some investment by JB in the playing side and back room infrastructure to mount a promotion push, there’s a likelihood that the trading loss would be greater – if a promotion push looked like it was going to be successful the club may see higher gates at the tail end of the season, offsetting some of the potential loss, and promotion itself would up the club’s income, but equally if the push fell away then money will be lost into the ether.

Regardless of promotion or not, in next season and those a few years after, I don’t see how the club can turn a profit. So in terms of an investment – and you only invest financially in a business if you expect to see a profit return - PAFC is a non-starter. It has no financial worth. If you’re after making money in the short term (or even the medium term), you may as well invest in a company making chicken-coated chocolate biscuits.

So measured in these terms, the way I see it the only financial worth the club has is in its future potential as club in Championship or higher, because in theory that would mean heftier match day income as per the crowd/sponsors/etc factors mentioned above.

With Argyle currently sitting 91st in the Football League, saddled with old debt and with an owner who’s stated that the club should live within its means i.e. spending what it earns, then that potential worth seems very far away. Anyone looking to invest in the club at the moment with the view to a financial return would have to be bonkers.

All of which is an extremely long-winded way of saying that Argyle is currently worth nothing.

So what should the Trust do with regard to the 20% offer? Who knows. As far as I’m aware the terms of the offer have yet to be made public but I look forward to hearing what the newly elected Trust board have to report as and when there’s something to report.

I would say, though, that if the Trust does vote to take up the offer having deemed it fair – it may well be utterly unreasonable and exploitative - and can raise the required funds (20p as per the Ridsdale/Heaney valuation) then we’re investing not in the worth of the club, but the value of the club. And that is not a bad thing per se.

If anyone’s still reading, I’d be interested to hear what you think to the above load of bollocks!

Agree with the valuation, what you would be investing in is potential, we are hopefully at the bottom of the market and can only improve. Now is the time to buy shares IF the price is right.

I've absolutely no idea the financial valuation of the club so all I can really add to this is a couple questions.

PCC paid £1.7m for the ground, did this money go to Brent or the Club?. If it went to the Club then I assume the development land (which was valued at £400k at the time) still belongs to the Club?.

Obviously the Trust Board are going to need the ins and outs of a cats arse regarding the finances of the Club, are they going to be held to confidentiality clauses and if so, how are Trust Members going to be able to make a call on whether to go ahead and buy in or not?.

From what I can see, it's gonna cost the Trust nothing to initially purchase 20% but from thereon they'll need to match percentage wise whatever the 80% decide to invest. That's just simplistic guesswork though and it's just not going to be that straightforward if the GasBoard shenanigans are anything to go by.

Any significant lump sum upfront payment would be a non-starter IMO.

One of the new board - sorry, can't remember his name - was experienced at financing football & sporting projects. That may reap dividends for the club.

There were a number of "we don't knows" in your post, Nick - and that's the problem. When I posted similar questions on the Trust forum there was a deafening silence. I think Tim Chown came on and basically said that some of the answers will come when the Trust board begins discussions with the club.

Interesting, though, if you're right in some of your musings, it does look as though Brent is putting money up front to finance the club.

Surely the councils £1.7m went straight into Lombards coffers and as DL said (or hinted) the balance is still being chased from the guarantors.

Charlie Wood wrote:

Surely the councils £1.7m went straight into Lombards coffers and as DL said (or hinted) the balance is still being chased from the guarantors.

According to DL

Damon.Lenszner wrote:

Greenskin - There was originally only one freehold, encompassing both the stadium and the land. I have been told but have no proof that when the deal was done there was a split as you say, with the stadium gpoing to the Council and the land to JB (or one of his vehicles). The total paid for the entire freehold was £700k - which was paid to Lombard, then JB sold the stadium to the Council for £1.6million. Lombard is now chasing the remaining £1.35million on the debt from the 5 original guarantors of the mortgage.

[You must be registered and logged in to see this link.]

knecht wrote:

One of the new board - sorry, can't remember his name - was experienced at financing football & sporting projects. That may reap dividends for the club.

There were a number of "we don't knows" in your post, Nick - and that's the problem. When I posted similar questions on the Trust forum there was a deafening silence. I think Tim Chown came on and basically said that some of the answers will come when the Trust board begins discussions with the club.

Interesting, though, if you're right in some of your musings, it does look as though Brent is putting money up front to finance the club.

I think it's the same guy who comes from RBS, so, hardly a ringing endorsement of his business acumen there.

It says a lot for 'Transparency, integrity and good 'football governence', that after all this time...

The fans still really have no clue as to how much was paid by who, to whoever, and who owns what?

And yet some people are already endorsing the Trust buy 20% of whatever 'it' is offered them.

It's so they can state they own part of their football club Ricks.

They have no concept of the bigger picture. Buy 20% of the club and then discover down the line that they having paid £20 for their share are suddenly facing a 20% share of a £17million debt.

Nobody is buying into the club yet and I'm not aware of a blind rush by the Trust to buy the 20%. My impression is that people are asking questions and waiting for answers. Do you really think the rest of the world is less clever than you?

Your Club was valued at 7p in the £ before the appointment of your President.

I would guess its value has fallen further

I'd happily pay 20% of what Brent paid for the club in order for a seat on the board.

I'll just get the money, I dropped it down the back of my sofa earlier.

Fans are crying out for info on this but cant find anything that resmebles detail..............has it really been thought through??
I imagine come mid may it'll be used as attempt to get some money into the club for the coming season although any mney surely goes to james Brent or Akkerron ?

Cerbera wrote:

It's so they can state they own part of their football club Ricks.

They have no concept of the bigger picture. Buy 20% of the club and then discover down the line that they having paid £20 for their share are suddenly facing a 20% share of a £17million debt.

What are they buying into? A Plymouth Argyle Football Club that do not own anything but the player’s contracts, a lease on Home Park, a lease on Harpers Park and a football debt £?m.

knecht wrote:

Nobody is buying into the club yet and I'm not aware of a blind rush by the Trust to buy the 20%. My impression is that people are asking questions and waiting for answers. Do you really think the rest of the world is less clever than you?

Who are you talking to?

I said "some people", I made no mention of a blind rush...

The "rest of the world less clever than me"?

If you mean every single person, well... No.

But 99%? Yes.

What about you?

For the avoidance of all doubt, I thought it would be helpful to outline where the board of the Trust is at present, and to outline our approach over the coming weeks and months.

1. The detail of the offer made.

At present there is no detail and effectively there is no formal offer. What has been outlined by James Brent is an opportunity for the Trust to own 20% of the club. That was explained by James at the Guildhall meeting and privately in an email to Wozzer. I'll use the word offer from hereon in, but will put it in inverted commas to set out that there is nothing detailed as yet.

2. The Trust's response to the 'offer' as it stands

We haven't been staring at our navels, although you will appreciate that the election period we have just been through limited our ability to speak out publically about the 'offer'. The board pre-election, Wozzer, Tim and I, decided not to advocate beyond the principle of community ownership of football clubs that is set out in the Trust's aims and objectives. It is now for the new board to decide whether it can or will take the steps to make that principle a reality in whole or in part.

After the offer was made, the Trust spoke to Supporters Direct and read through the guidance and published material related to the 'offer'. That included SDs papers on financing community ownership and a recent paper on licensing of football clubs and engagement with fans. The meeting I had with SD enabled us to set out some of the pitfalls to avoid and some of the questions we need to ask. I ensured that all the candidates taking part in the election knew that we were progressing work on finding out more about the opportunity.

3. What we need to do next

Bluntly, we need detail, we need to sit down with James Brent, we need expert advice and we need to consult with members.

We need to know the terms of the 'offer', what opportunities or liabilities it might put on the Trust (and remember we're regulated by the FSA so as a board we are accountable in law for decisions taken), what role or powers, specific or non-specific, the 'offer' gives the Trust in the running of the club. And, of course, we need to know the value that James Brent puts on that 20%, both in monetary and non-monetary terms.

For what it's worth and without having any detailed financial information, Nick's assessment of the club's value seems fairly accurate to me but that cannot of course take into account future potential.

In terms of expert advice, we will need to consult financial and legal experts (we are in touch with SD on this and will take advantage of their leverage to do it as near to cost-free if possible) and we will need to speak to other Trusts that have gone down this road - Swansea, Lincoln for example - to see whether there are aspects of their journeys that correspond to the 'offer' on the table.

In terms of consultation with members, we have no intention of proceeding without that. We will look to ensure that all members and other stakeholders are given an equal opportunity to have their say and that we publish as much information about the offer as we can.


I hope that gives an understanding of where we are at the moment. I realise the frustration in not being able to come out straight away with a rining endorsement of the plan, but we need to look at all sides of the opportunity and take a broad and deep view of the possible pros and cons. The bottom line is what's best for the club, the community in which it exists, and the Trust and its members and whether that 20% makes sense now or in the future.

Thanks for the update Gareth. It will certainly be interesting to find out what the "offer" actually is.

Thanks for that update, Gareth, much appreciated.

Rickler wrote:

knecht wrote:

Nobody is buying into the club yet and I'm not aware of a blind rush by the Trust to buy the 20%. My impression is that people are asking questions and waiting for answers. Do you really think the rest of the world is less clever than you?

Who are you talking to?

I said "some people", I made no mention of a blind rush...

The "rest of the world less clever than me"?

If you mean every single person, well... No.

But 99%? Yes.

What about you?

OK, my apologies. It just seems like hearing someone bloke in the pub announce that he has invented a perpetual motion machine and then taking the time to present arguments that it's not possible. It's a waste of breath. Is anyone seriously saying, without thought, that we should buy into the 20% NOW?

As for your closing question..... I guess I'm one of that 1%. Always have been. I just have been incapable of making people realise that.

Thanks for all the information, Gareth. As expected, the Trust leadership are doing a great job, thinking things through and taking advice before jumping into any decisions. For which you all get a gold star

Peggy wrote:

Thanks for all the information, Gareth. As expected, the Trust leadership are doing a great job, thinking things through and taking advice before jumping into any decisions. For which you all get a gold star

I couldn't agree more. The last thing we need is a rash decision with unforeseen/obvious consequences.

Does anyone think that Brent made the offer without thinking it through at all himself? To make it look as if he was interested in getting the fans on board at that meeting, when he actually doesn't care?

The lack of detail thus far is nothing short of startling.

The lack of detail thus far is largely down to the Trust elections. A meeting with James Brent is being organised for late next week to start the ball rolling.

Woz

wozzer wrote:

The lack of detail thus far is largely down to the Trust elections. A meeting with James Brent is being organised for late next week to start the ball rolling.

Woz

Any lack of detail from the 'Trust' end, which you could hardly be blamed for - elections or not - is because the Trust hasn't been briefed by Brent yet.

The lack of 'detail' from Brent's side of things I think needs a lot of explaining. I find it hard to believe that for someone who touted the fans so much, that we are this far along, and nobody (on the fan side of things) really seems to know anything about anything, never mind the details in the offer to the Trust to buy 20%.

Example:
Day to day... Who is running the club?

Small things like that....

Rickler wrote:

wozzer wrote:

The lack of detail thus far is largely down to the Trust elections. A meeting with James Brent is being organised for late next week to start the ball rolling.

Woz

Any lack of detail from the 'Trust' end, which you could hardly be blamed for - elections or not - is because the Trust hasn't been briefed by Brent yet.

The lack of 'detail' from Brent's side of things I think needs a lot of explaining. I find it hard to believe that for someone who touted the fans so much, that we are this far along, and nobody (on the fan side of things) really seems to know anything about anything, never mind the details in the offer to the Trust to buy 20%.

Example:
Day to day... Who is running the club?

Small things like that....

I forget the names now but there's 2 blokes running the club on a day to day basis. So this particular information is out there in the public domain. They were introduced at the last Guildhall meeting when the new board was named, the 20% offer made and the GAS board announced.