Plymouth Argyle: Crisis Without End?
Despite their outstanding recent form, Roger Willis questions how far Plymouth Argyle have really come since owner and chairman James Brent took them out of administration in 2011.
“Flies all green and buzzin’ in this dungeon of despair” once sang Frank Zappa. Well it’s the Greens that are a-“buzzin’” at present and manager John Sheridan has developed a side which — a horrific 0-4 reverse at home to York City notwithstanding — has just enjoyed a fine run of performances and results that has seen Plymouth Argyle shake off an iffy start to the season and surge up the League 2 table. Our last three games have all been won; eleven goals scored; one conceded. A push for the play-offs is a very real possibility. Dreamtime.
As I write this it is very possible – probable, even – that if the run continues, Argyle could hit a play-off spot and then… Who knows? After the last few years spent relentlessly fighting, and twice losing, desperate battles against relegation this represents tangible and significant on-field progress.
And yet those flies Zappa mentioned earlier don’t appear to be very far away.
Initially prompted by the Clubs in Turmoil series, this is now the fourth piece that I have written for these pages. If you recall my earlier conclusions you’ll be aware that I was concerned about the club’s financial position after its exit from administration and that I was worried by the residual debts that I estimated to be north of £5m. Well I’m sad to say that those nagging fears have never gone away and this week they burgeoned into near panic.
The first indication that Argyle’s budgeting was an on-going problem came in December 2012 with the unexpected announcement that club captain Darren Purse was to be transfer-listed to help with cutting costs. This had a puzzling effect and did not ring true because chairman James Brent had confidently opined only the month before that the club was in “fine fettle” during a local newspaper interview. Soon afterwards a club restructuring saw redundancies on top of those made during the administration process when P&A’s loathed troubleshooter Brendan Guilfoyle was in charge.
‘So what?’, you may be thinking. These things happen. And indeed they do but the justification coming from the club for these measures was disconcertingly unconvincing. Apparently Argyle had ambitiously (I may suggest naively) budgeted for home crowds of 8,000. Nobody with a feel for the club or any knowledge of its history, not even Peter Ridsdale who was accredited with its invention, could have realistically proposed, and then doggedly stuck to, such a figure for Argyle in League 2. ‘We have 250 members of staff and this is too many’, a club spokesman told the BBC to justify the redundancies. Another hugely contentious figure seemingly plucked out of thin air that must have included every last person who did anything at all at the club ever. Bandying around figures such as these does little to inspire confidence, engenders suspicion and fuels doubt.
There was not a hint of doubt in a statement issued by the Plymouth Argyle Supporters’ Board (PASB) in July 2013: “This season the current debt is £5 million and James Brent confirmed that the Club will not be standing on its own two feet this season”. Furthermore, at a meeting last week with Argyle’s Senior Greens the club’s Chief Executive Martyn Starnes confirmed that Mr Brent had so far lent the club close to £2m and wasn’t prepared to lend any more. The club’s debt levels must currently be at least the £5m confirmed by PASB and how much more is anybody’s guess. My gut feeling is that £6m can’t be far from the truth.
Which begs the question “why is the club attracting the second best home crowds in League 2 losing so much money?” to which a rational answer has never been suggested. This intrigues me. The payback terms for the outstanding administration debt suggest that the club needs to find around £200,000 per annum in order to service it. This is a substantial amount of money but it shouldn’t cause a problem to a club with a turnover of over £4m abiding by the newly introduced Salary Cap Management Protocol, which caps expenditure on players’ wages at 55% of revenue. It can’t be the cost of business rates because Mr Brent negotiated two year’s rate rebate from Plymouth City Council at 100% (and a third at 50%) amounting to £200,000 so far when he sold and leased back the ground. It’s a mystery the club’s accounts, published 5 months late and in the scantest form legally permissible as part of the accounts for Mr Brent’s umbrella company Natatomisam, do nothing to address.
And then came a bombshell out of the blue: Mr Brent sold a 5% share of the club to Tony Wrathall for an undisclosed sum. This was always going to be hugely controversial and divide opinion because Mr Wrathall, a local businessman who operates mainly in tourism, had been one of the seven members of the previous board, known as The New World (amongst other things), which had come so close to exterminating Argyle as it racked up £17m of debt, which left a swathe of unpaid creditors in its wake and which caroused merrily in the board room at home games whilst being cooked for, served by and cleaned up for afterwards by members of staff they absolutely knew they were going to be unable to pay. Argyle’s President Chris Webb was unusually outspoken and critical of a club decision and issued a scathing statement railing against Mr Wrathall’s return. Mr Wrathall was also a member of various companies set up by the New World in an increasingly labyrinthine corporate structure which, to name but one disgraceful act, signed a contract with a company called Inscapes to replace the Home Park pitch at a cost of several hundred thousand pounds knowing full well that we were never going to be able to honour our side of the deal. Suggestions that Mr Wrathall was not involved at the heart of the New World ring extremely hollow and Mr Webb’s ire is understandable and widely shared.
The only conclusion to be drawn from making such a distasteful, predictably unpopular and divisive decision is that it was absolutely necessary and that Mr Wrathall brings something to the boardroom that nobody else can. Which is true and in this case it is money. We know this for a fact because it was confirmed at the Senior Greens meeting mentioned earlier that the club was experiencing a cash squeeze, that Mr Brent wouldn’t lend the club more money and that his request to the other board members for them to contribute was met with only gazing at shoe leather, glancing at wristwatches and intense scrutiny of the clouds floating by through the nearest window.
Mr Brent further justified the return of the former director by exonerating Mr Wrathall from significant involvement in the meltdown, going further by suggesting that ‘without his continuing financial support, the club would have failed many months earlier’.
Which is somewhat at odds to this statement, made by Mr Brent in January 2012: “My personal view is that a statutory board of directors must be people who provide good governance and direction for the club.It shouldn’t be folk who are willing to buy their way into a boardroom seat and enjoying the football.”
Mr Brent was again asked in late 2012 about his views on holding the previous board to account for their actions. His response was that that was a matter for the Secretary of State, who should produce a report within six months of the exit from administration. Unfortunately that report is not public, so neither Mr Brent nor the supporters have any idea what conclusion it came to. It would make an interesting read.
And Mr Brent has never shared what had gone on in the period leading up to administration with us as supporters, in fact such talk had been dismissed as backward-looking, nonsensical and a waste of time. I’m all agog should he decide to share his findings.
Still it is thought that Mr Wrathall’s input has secured the club’s immediate future and in due course we’ll discover whether that is true or not.
Exactly what might have caused a cash crisis serious enough for the club to shove its begging bowl in Mr Wrathall’s direction remains, as does so much, unclear.
One thing that cannot have helped is the difficulty the club’s major sponsor First European Securities (FES), a loans company whose logo festoons the ground, the club shirt, supporters’ forum Pasoti and much more besides. FES director Nik Barron had until recently been a magnificently benevolent and generous supporter of the club but his company has unfortunately run into what seems likely to be a protracted dispute currently being overseen by an insolvency practicioner. It is hard to underestimate Mr Barron’s financial contribution to Argyle, both official through sponsorship and unofficial by supporting auctions, to the fund-raising which has done so much to help the staff (still being paid wages owed to them for the administration period) and the sponsorship of free coach travel to some away games has made Mr Barron a very popular figure around Home Park. It is widely hoped that Mr Barron and his newly-formed company First International Lending (FIL) emerge from all of this unpleasantness in the rudest of health before too many months have passed and his current inability to take on the role assigned to Mr Wrathall is understandable.
So Argyle is a club with turnover of around £4m, debt levels of around £6m, running at a loss and has an owner, well co-owner along with Mrs Brent – who I don’t recall ever seeing at Home Park – who has had to make a hugely unpopular decision to raise finance despite being widely referred to as “hotel owner”, “successful businessman”, “ex-Citibanker” and a “millionaire”. Surely a man of his means and connections ought to be able to arrange enough finance by going to market to cover a temporary hiccup? Well apparently not.
More unexpected and unwelcome news soon followed. Brent’s Akkeron Hotels Ltd (“Akkeron” is Mr Brent’s chosen business nom de guerre), a subsidiary company of the Akkeron Hotels Group, had strangely been renamed Rosford Management Ltd before going into administration less than a week later after it recorded a loss of £4.1m and had breached banking covenants in two of the subsidiary companies: Akkeron Hotels Ltd and Akkeron Hotel (Admiral) Ltd.
Hot on the heels of that Akkeron Hotels (Admiral) Ltd and Akkeron Hotels (Corby) Ltd also went into administration. Mr Brent’s thriving hotel empire doesn’t seem to be thriving so much anymore.
All of which could have possibly affected the difficult decision to recruit Mr Wrathall and all of which potentially has much wider implications for Plymouth Argyle and the city of Plymouth for a number of reasons. Not least of which is Mr Brent’s plan to redevelop the land around Higher Home Park (HHP) in a £58m scheme which will incorporate a new, but controversially small, grandstand. Further, the development will include retail developments including shops, bars, franchised restaurants, an IMAX cinema, underground car park, 120 room hotel, ice rink, a dentistry complex (which will fill one corner of the ground once occupied by supporters) and a school (which will fill another). The footprint for all of this will be lost to both the club and the city’s park forever and the grants to help build it all along with any income they generate will go to Akkeron.
The benefit of all of this to the club is unclear and much disputed. Apparently unpublished projections (none of the figures that justify any of Mr Brent’s planning have ever been published or properly scrutinised) indicate that income, profit or net profit (or something) is expected to increase by £1m per season as a result and the new grandstand will be free of cost to the club. Except the club’s rent, payable to Plymouth City Council, will increase by £30,000 per annum as a result and rent raised from retail units in the new stand will go to Akkeron and not to Argyle in perpetuity. In truth Argyle will, year-on-year, pay more rent, lose ground capacity and a significant chunk of land to boot which is a strange definition of “free”. It’s not even been confirmed that there will be a supporters’ bar in the structure despite the topic being raised many times.
The key component of all of this is, surprisingly for a development at a football ground, the ice arena. Plymouth City Council has long since wanted to develop the city’s Millbay area and a grand plan to do so exists but it has only made progress in dribs and drabs so far and the city’s existing ice rink is smack bang in the way. By agreeing to build the Ice Arena for the city Mr Brent was able not only to achieve planning permission for HHP, despite 1.22 acres of his plan spilling beyond the footprint of land actually owned by him or Argyle (which is also him to all intents and purposes) and into municipal parkland long since bequeathed forever, so everybody thought, to the people of the city of Plymouth.
All of which is small beer to the opportunity it also offered for an estimated £300m redevelopment for Millbay for which a tiny start was made when ownership of the city centre’s Pavilions site was transferred from Plymouth City Council to one of Natatomisam’s subsidiaries, 5 Directions Ltd, for the consideration of £1. The site is valued in the latest 5 Directions accounts at £4,050,000. Along with the transfer came a tidy little grant for ‘operating costs’ worth a further £2m. The Pavilions and grant are the only assets of 5 Directions Ltd but the transfer was not the only major transaction in the accounts. Mr Brent’s pension fund paid 5 Directions (Mr Brent paying Mr Brent) £900,000 for a 16% share of the company – in effect 16% of the Pavilions site. The question of if Mr Brent can invest almost £1m into the Pavilions then why has he made it seem he is no longer willing to invest in his football club lingers in the air?
So will it all go ahead? Who knows! Mr Brent either can’t or won’t actually commit to anything until the contracts are in place and at present none are signed. He missed the last application for a lucrative government grant to build his school in one corner of the ground. The next round of decisions for that will be made in May. Finding a backer for the underground car park appears to be in difficulty too following a Plymouth City Council decision not to enforce parking charges in a nearby Park & Ride car park which makes the idea of paying to park a few yards away look rather silly. Despite agreeing to transfer the 1.22 acres of parkland to Akkeron for the development the contract for that has also not yet been completed, either.
And looming over all of this is the spectre of post-administration debt. Argyle is now about halfway through the 5 year repayment schedule agreed with the FL and PFA. At the end of that period Argyle will have to pay a final balloon payment of approximately £2m. No alternative. No excuses. Quite how it will be able to find this money is also unclear and Mr Brent has never given any public indication that he has a plan in place for it. If HHP goes ahead everything that could be taken from Plymouth Argyle Football Club will be gone and there will be nothing left to sell or borrow against unless Mr Brent actions a clause in the lease agreement, actionable every 5 years, with Plymouth City Council to buy the ground at a pre-arranged price of 12x the annual rent which, at present rates amounts to about £2m (coincidentally similar to the sum given to Mr Brent to subsidise the running of the Pavillions by Plymouth City Council). When asked if he intended to buy the lease at a recent Q&A session with supporters Mr Brent replied “no comment”. There is widespread support among Argyle’s supporters, illustrated emphatically by a recent survey, for Home Park to remain under council ownership and not to revert to any form of private ownership.
Still everything is tickety-boo and anybody thinking otherwise is a silly old windbag.