City are still an attractive club for purchasers
FINANCIAL GURU KIERAN MAGUIRE CASTS HIS EYE OVER THE ACCOUNTS
Hull City released their latest accounts last week, with the club reporting a loss of just over £8m for the last financial year which came to an end in June 2021. That was a period where clubs were hit hard thanks to the coronavirus pandemic, and perhaps City were hit harder than most, suffering relegation to League One and therefore a significant drop in revenue.
The Tigers were the first club to reveal the state of their finances, which painted a glum picture as relegation from the Premier League and then the Championship continues to bite, coupled with the impact of the shutdown.
Despite the obvious reliance on the Allam family to ensure the day-to-day running of the club, football finance expert and academic Kieran Maguire says the club’s accounts are not too bad given the way the industry has struggled in the past 12 months.
“They are as good as can be reasonably expected, for a club that’s been relegated to League One,” Maguire told the Mail.
“If you consider that income has fallen by 94 percent, wages are down by 86 percent compared to when they were in the Premier League which was four seasons ago, it shows the incredible impact - or incredible benefit - of being in the Premier League.
“They coped reasonably well in the first two seasons following relegation as a result of the parachute payments, but when they ended profits very quickly turned into losses.”
City have been up for sale now for a number of years, with the Allam family saying on numerous occasions they would be open to selling, even giving it away for free if the right person came along, though that has yet to materialise - much to the frustration of fans. The club’s crowds have been disappointing this term, with a belief among some supporters that the feeling towards the ownership is impacting attendances thanks to the apathy and frustration that has built up over time.
Maguire believes City’s finances will continue to take a hit in the forthcoming financial year, with attendances not expected to rise beyond their current level unless a change is made.
He said: “I think it’s a concern the present ownership, the relationship between the owners and a section of the fanbase is clearly toxic. If we look at other clubs such as Blackpool where that relationship failed, Swindon as well, fans can organise, they can vote with their feet and clearly that does have an impact.
“A matchday income of £3m is still very good for a League One standard. I think that’s largely due to ifollow and the utilisation of the stadium for other things.”
As a League One club, City took out a loan from the EFL for an unspecified amount, which the Mail understands was used to pay its tax bill to the government.
Under the terms of that loan, the Tigers find themselves working under a transfer embargo and given the ongoing takeover process involving Turkish media mogul Acun Ilicali, Maguire admits it was in some ways a surprising move, particularly if it sees the club return to the third tier of English football.
“That does seem a bit counterproductive to have taken out a third party loan which will hamstring the manager in terms of recruitment,” he said. “I appreciate that the Allam family are looking for an exit route, so they might say it’s a low interest/no interest loan from the EFL that’s cheaper than borrowing from elsewhere and that’s the logic behind the decision.
“[But] if at the same time it increases the chances of Hull City being relegated this season it’s going to make it more difficult for them to sell the club for the price they are looking for,” he continued. “They’re looking to extricate themselves from the club with the minimal financial damage to themselves.”
Vice-chairman Ehab Allam has spoken in the past about his perceived value of the club, but what of it now? Back in the Championship and with a squad value of around £20m according to the owners, what can the family expect to recoup, should the deal with Ilicali get done, with the Mail understanding there remains a willingness from the businessman to complete a buyout.
“If we look at the amount the club owes to them (£39.5m), would you be willing to pay that for the club as a League One club? Ipswich went for £17.5m.
“There’s issues with the stadium. I’ve noticed that the rent has been increasing each year. It was £400,000 in 2014 and now it’s £1.1m that they pay. There does appear to be a step up in terms of rent payable on an annual basis; how long that goes on for is something that a new owner [would take into account].
“If you’re buying a club and it’s got a
99-year lease then there is some protection for the new owners. What they would be more interested in is the terms of the rental lease: can they do things with the stadium?
“Manchester City don’t own the Etihad - it’s rented from Manchester City Council - but it’s on a long lease and they’re free to do with it as they see fit, so if you’re on a 99-year lease I don’t think you’ve got anything to worry about from an ownership perspective, whilst you might not nominally got ownership, you’ve got effective ownership for the foreseeable future, or effective control of it which I think is important.
“You look at Wigan, Sunderland, Ipswich, Charlton - Sunderland went for around £27m to £30m and no disrespect, Sunderland are a bigger club [than City]. I would say it’s more on a par with Ipswich as a bottom six Championship, top of League One club.”
“They’ve got the stadium which is newer and the ability to rent out the stadium so you could add a bit of a premium onto that.
“£20m-£25m as a lower Championship club would be about right in my view.”
So, why Hull City - a club with over £40m worth of debt, a playing squad built with one of the lowest budgets in the league and a dwindling home fanbase?
“Only 20 people can own a Premier League club at any one time,” he said.
“Hull City have been in the Premier League twice in recent years so that is an attraction.
“It is possible to flip a football club at a profit if you get it into the Premier League, so there’s an attraction there.
“There’s the trophy asset element to it. English football does have a place in terms of global appeal and I think those are all positives.
“Outside the Premier League, a lot of those positives evaporate very quickly given the extent of losses that are incurred in the Championship.”
The concern, Maguire says, is that too many businessmen think they can replicate their success from elsewhere and turn a club into one which makes a profit, a case in point proven recently with the crisis now engulfing City’s Championship rivals Derby County, and that remains a concern moving forward for all clubs, not just the Tigers.
“There are lots of people who take the view that ‘because I have been successful in industry A, I can convert a football club into a successful one by using the same means.’
“Mel Morris, Marcus Evans, Randy Lerner, Tony Xia - a lot of them walk away with their fingers very much burnt.
“Marcus Evans has written off £90m, Randy Lerner well over £100m, Ellis Short at Sunderland wrote off over £150m.
“I always say it’s a bit like owning a race horse: the two best days of owning a race horse are the day you buy it and the day you sell it.
“The bits in between are an expensive hobby.”