The Murky Financial World of Bolton Wanderers (Reprise)

The Murky Financial World of Bolton Wanderers was published on this website at the end of last season.  Since then Manny Road has been repeatedly hacked, resulting in a temporary loss of the content.

The article is reproduced  below  in its original form with an addendum bringing matters up to date.

The Murky Financial World of Bolton Wanderers

With the dust beginning to settle on a football season in which Bolton Wanderers were relegated from the Premier League, attention has turned inevitably to the club’s financial position.

Reebok spin doctor Mark Alderton acted quickly after the event, getting Phil Gartside onto the airwaves to deliver assurances that everything was fine.  The Bolton chairman popped up on Talksport last Tuesday, where he received a sympathetic reception from interviewers who were more lap dog than Rottweiler.

“We’ve got a fantastic benefactor in Eddie Davies, who happens to come from Bolton which is an asset,” said Gartside.  “He’s supported the club over the last ten, fifteen years.  We’ve got a very small bank debt.  We’ve got a £10 million overdraft with Barclays.  In fact Barclays raised that this year to £15 million.  The rest of the debt is better described as equity because it’s Eddie’s debt, he doesn’t get interest on it and he’s there for the long term.

“When you borrow money from a bank and the bank then come and demand it back, that’s a different situation, but our overdraft at Bolton is, as I say, £10 million, we use it for working capital during the year.

“The rest of the money is Eddie Davies’s money, he’s been a big supporter all his life from the age of six years old and he’s 66, in good health, I can’t say anymore than that.”

All this ties in with the line trotted out since the debt started to spiral, and the banks wanted out.  To sum up:  The money is owed to Eddie Davies. As long as he’s remains interested and alive there isn’t an issue.

There’s one major flaw in this explanation:  It isn’t quite true.

Leaving aside the almost £5.2 million in the latest profit and loss account described as ‘interest payable and similar charges’ as well as other sums taken from the club by Davies in recent years, there’s a problem with the arithmetic.  According to the Sunday Times Rich List, Eddie Davies has a worth of around £60 million, most of which will be in assets.  Even allowing for errors in that estimate, it would take a cute conjuring trick to lend £100 million in hard cash to anyone.

The truth is that the money is owed to Eddie Davies’s company, Moonshift Investments.  Little is known about Moonshift, as it is registered in the British Virgin Islands where standards of disclosure are less demanding than in the UK.  It is, as the name suggests, an investment organisation.  For example it has close to a 10% stake in Squarestone Brasil, which is described as an ‘Anglo-Brazilian real estate investment and development company specialising in the Brazilian shopping mall sector.’

So where does the £100 million lent to Bolton Wanderers originate from? Who are the other investors in Moonshift?  What happens if those investors get twitchy as losses accumulate?  The chances of those questions being answered are remote.

Lest this should be seen as an exercise in Davies bashing, it should be pointed out that his take over of Bolton in December 2003 offered the only viable paddle when the Whites were up the financial creek, with debts of £60 million and a state close to insolvency.   However, that involvement came at a price.

Chief executive Allan Duckworth said at the time that Davies’s loans to the club carried repayment costs “at a premium which reflects risk, which is high at a football club.”   Suddenly, the phrase “he doesn’t get interest on it” looks less than convincing.

The total debt is only part of the problem.  The rate at which annual losses have stacked up is alarming. From £8 million in 2008, to £13 million the following year, then £35 million and £26 million most recently.  The £35 million figure is the one that catches the eye, as it well it might, representing over half of turnover.

Still, there are those who have done well.  The wage bill has almost doubled over five years and now stands at £56 million, including social security costs.  Between 2009 and 2010 there was a whopping £14 million increase.  There was also a hike of nearly £9 million between 2007 and 2008.  So much for Gary Megson’s claim to have reduced expenditure in that respect.

Interestingly, £8 million of staff costs were not originally included in the accounts for 2010.  The figures were re-presented in the 2011 report.

At this stage, it might be pointed out that the income from television increased over the same period.  This is true, but by considerably less than the wage total.  In 2005 £1.4 million more was received in TV money, than was paid out in salaries.  That position was quickly reversed and by 2010 wage payments were outstripping Sky’s contribution by an astonishing £16.5 million.  The difference is now £11.4 million, so at least things are moving in the right direction, although that’s due to an increase in revenue rather than a reduction in outgoings.

Then of course, there is Gartside’s own remuneration.   In the year ending in June 2010 (£35 million loss, remember) he received £532,000, including a bonus payment of £156,000.

All of which marks the Bolton Chairman’s cheery take on matters monetary as, at best, disingenuous.  No enterprise can consistently spend more money than it receives, not even in football where sensible financial planning doesn’t apply.

His claim that outgoings on wages can be halved may turn out to be true, but there’s still the matter of a £25 million drop in broadcasting revenue. If the Wanderers face a prolonged spell out of the Premier League then things get worse.  By year three, the parachute payment drops from £16 million to £8 million.  By year five it’s gone altogether.

‘But the most wonderful thing for all football fans is the dream that the best is yet to come.

‘A new era under the team management of Owen Coyle is just beginning!  Let’s all enjoy the journey together!’

Those words come from Phil Gartside’s introductory statement to the 2010 accounts.  One can only hope that his financial predictions are better than those that relate to what happens on the pitch.

Since the article was published a further set of accounts has been released.  They show a further loss of £22 million and a total debt (now converted to a long term loan) of  £136 million.  It transpires that the interest charges are being added to the capital. In other words, the loans, this and the previous ones, are not interest  free. The amount spent on wages is virtually unchanged at just under £56 million.

By contrast Wigan Athletic made a profit of £4.3 million over roughly the same period. Wigan’s debt reduced to £20.5 million from £72.2 million with £48 million  converted to equity.

Attempts to hack Manny Road continue on a daily basis.

– Richard McCormick

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