" DOUG LEE ON CITY'S FINANCES "

Cardiff City’s finances have once again come back into focus as part of the shock rebranding proposals that came to light last week. In an exclusive interview, CHRIS WATHAN met the Bluebirds’ finance director Doug Lee to try and uncover the true state of the club, the importance of the proposed investment and what the future may hold for City

Chris Wathan: Amidst all the headlines about the rebranding, one thing that has been underlined is that the club’s debt is still very much an issue. What is the current debt position?

Doug Lee: Last year’s financial results have been well-publicised and it’s a well-trodden path that we are losing approximately £1m a month. At the moment the Malaysian investors are supporting that. In simple terms that remains the number.

CW: In terms of the Malaysian’s equity, where does that stand?

DL: The conversion was always part of the wider strategy and that’s part of the debate which has gone into the public domain. What last summer’s EGM allowed us to do (where the Malaysians converted £5m debt into shares) was to give us a share capacity to undertake substantial conversions. If fully utilised, that would largely allow us to wipe out a lot of the Malaysian debt to the extent – although still growing until we can address the profitability issues – and resolve our historic debt problem.

CW: Speaking of historic debt, is it safe to say the largest of that – the Langston loan – has been a block in terms of financial growth, stopping conventional borrowing and growth?

DL: That’s overstating it but the Langston debt is a major hurdle to financial stability. However, when you talk about conventional borrowing, such as banks, there is very little appetite certainly with UK banks to take on new borrowing with football clubs.

It’s not a Cardiff issue, it’s a football one and until the whole industry gets its house in order banks don’t want to take on the risk. That’s where financial fair play regulations may change the landscape both for financial stability and their ability to borrow – although their need to borrow should lessen if they worked as described by Uefa and, latterly, the Football League.

CW: It’s clear Financial Fair Play is a real factor. From the outside, I take it some of the proposals in terms of cash injection, is to try and get the club a financial footing to deal with these new regulations?

DL: It’s part of the consideration because part of the strategy is that conversion of debt to equity. Part of the issues with FFP is a measure of your profitability. In football that’s in terms of how much of a loss you’re making, after interest. The extent of how you address your debt and reduce your interest is one of the issues you have to overcome to stay within the thresholds.

CW: But Cardiff are losing £1m a month and from next season the maximum is £4m a year.

DL: It’s not that straightforward. In the Championship, the rules adopted in April allows an acceptable deviation, or acceptable loss.

That loss can be part equity-funded and part debt-funded. The figure you’re referring to is the debt-funded element. You can make a larger loss if there is equity injection to support that. For the coming season, in total, loss is £10m. That threshold will reduce in steps over the following seasons to – under current rules – stopping at a combined loss of £5m per annum in the 2015 season.

That is a major hurdle, not just for Cardiff but for all Championship clubs. If you were to look back at all the financial results for season 2010-11 I’d be amazed if there are any clubs that are not very close or exceeding the thresholds.

CW: You’re well-aware the headline debt figure is £70m. People will look at that and say how on earth is Cardiff going to manage and restructure that debt?

DL: Because part of the strategy was always about new injections being equity-driven, so not debt-driven incurring interest costs. Under FFP, you can inject funding towards infrastructure – essentially stadium, training grounds, youth system – and any costs associated with that don’t count towards your deviation. The logic is that you can build for the future and it’s players, investment and wages that are being constrained.

CW: I take it then that the talk of stadium expansion and a new training ground is with FFP in mind and – in terms of the stadium – it can also add to revenue streams.

DL: It doesn’t affect FFP and there’s a revenue kicker in the stadium expansion. An additional 8,000 seats is a substantial revenue enhancement if we can fill it. But also it’s about putting the club on a basis where it can sustain Premier League football.

CW: Revenue drive is important in any business. Not many clubs are self-sustaining without cash injections but that is the hope. What are Cardiff’s aims to that regard?

DL: That’s partly why this whole commercial opportunity in the Far East is fundamental to our Malaysian investors’ strategy. You have to recognise that Cardiff has a finite amount of local income it can attract to the club. Under FFP, in order to invest in players and player wages as a result of the cap, you have to drive additional revenues.

You have to have some idea of the scale we could achieve. If Cardiff sold out its ground for every single home league match we would only add an additional £1m to our turnover per year. Giving the thresholds are going in steps of £2m we can do as much as we can in the UK – and we are currently a South Wales-based brand and not a UK one – then we would still have to cut investment in players and the squad to meet them.

In the medium term we need to find new markets and new income streams or we would see a shrink in the playing side which is the opposite to what fans want and what we want as a board. The Far Eastern markets are the most football-crazy growth markets in the world, so they are the obvious markets for us to try and focus on.

CW: At the same time, the biggest revenue is TV money and that would not be affected by a market in the Far East. Shirt sales and merchandise are drops in the ocean compared to that.

DL: You say that but our current revenue streams come in thirds: central Football League funds largely TV driven, matchday income and then marketing, commercial and merchandise. Within the Championship, TV is not the primary driver, although the balance is significantly different in the Premier League. Yet if you look at the top end clubs – and we’re not pretending to be anything like that – the balance is different because substantial revenue is from merchandise and sponsorship deals, not centralised money.

CW: I’m not going down the red shirt issue too much, but shirt sale revenues are negligible. Is the attempt for a Far East market more of a drive for sponsorship and those type of tie-ins?

DL: Yes. And what the Malaysian investors can bring to this is they have an existing network with lots of brands. Vincent Tan has Starbucks, retail outlets, hotels, airlines, mobile phones, brands and channels that would normally look to associate themselves with football to drive off the back of their presence and public interest.

CW: But how can Cardiff hope to achieve real success in these markets when numerous teams in the Premier League cannot?

DL: Because we have that direct link. Because we have people based there and who understand it and expanded businesses outside Malaysia throughout South East Asia, and, ultimately, their goal for their business is China. And if we got every Chinese person to buy a shirt we’d be pretty happy. That’s unrealistic but you have to recognise South Wales has a quarter-to-half a million people. Perhaps we can tap into a billion people in the Far East who might have some interest in the club.


Read More http://www.walesonline.co.uk/footballna ... z1vCYlkrgC

An unusually good piece from the Wales Online reporter.
In layman's terms, change or die.
I vote for change.

I can see where this red buisness is coming from now , altho Im sure Chinamen would wear blue if push came to shove tho realisticly ??

Very worrying. It seems the only way out of this is to sell our biggest "stars", and build again. Hopefully then we can learn from our mistakes from the last 10+ years, and become a bigger and better club for it

Very worrying. It seems the only way out of this is to sell our biggest "stars", and build again. Hopefully then we can learn from our mistakes from the last 10+ years, and become a bigger and better club for it

Worrying ..... how come ??

Depending upon the content of the next statement re the future direction of Cardiff after the proposals and the well documented events of the outburst of the clubs potential move forward and kit change etc will in essesence determine our future - However I feared along with others that the damage was immediate and that holes were to be plugged, not repaired. The first casualty was the going to be the retention of players - Whits especially, in direct contrast to the appeals by Malky and senior players who went on record saying he was vital to the squad, how the squad was to be developed and the way we approach games. If Whits goes, which I hope he doesn't then it's a direct change of direction by our investors and they have indeed began i fear an exodus strategy - this is what S B stated would happen in his appeal and the recent statement by the club in my opinion had all the hallmarks of a car doing an emergency stop, to determine the road ahead. Like others I hope this does not happen and they continue down the road with us in tow.

Quite blatantly a piece trying to direct the fans into accepting re branding in order to both save and push the club forward. However, it's also a very open piece showing our current predicament.

It is a stark reminder of the limitations of our current potential. Whatever we think, as fans, about our potential size as a club, the reality is that we are a South Wales brand and even major success would not make us a UK brand especially with the added England and Wales divide.

But the plan is obviously to by pass the UK market and attempt to take a slice of the massive Far East market. Unfortunately that could see us lose a bit of our local identity with the potential few million market place of Wales being engulfed by the multi multi millions populating the Far East.

Is Tan looking to use Premiership football to advertise all his brands in Malaysia and China, then also attach the Cardiff City name to that advertising? If that is the case he obviously sees the £100million gamble as a worthwhile one. He owns so many brands it could become a closed market of one, Cardiff City, in securing the sponsorship deals over there with those brands. This could then secure massive exposure for the club to his Far East customers and these could become potential purchasers of club merchandise and then possible fans. If it comes off as a gamble it would be MASSIVE for us.

No beating about the bush in the Echo about us going into administration within weeks without the Malaysian investment.


P.S. What was wrong with Gaviar's post on this at 3am. The early shift always get ignored.

viewtopic.php?f=2&t=81036

Very worrying. It seems the only way out of this is to sell our biggest "stars", and build again. Hopefully then we can learn from our mistakes from the last 10+ years, and become a bigger and better club for it

I noticed you posted this on the previous thread on this matter. How did you come to the conclusion that the ONLY way out of it was to sell players? The piece itself is giving us another way out of this.

Very worrying. It seems the only way out of this is to sell our biggest "stars", and build again. Hopefully then we can learn from our mistakes from the last 10+ years, and become a bigger and better club for it

I noticed you posted this on the previous thread on this matter. How did you come to the conclusion that the ONLY way out of it was to sell players? The piece itself is giving us another way out of this.

Where exactly has this report shown another way out ffs. One sentence he's saying cuts have to be made to stop loss, but they still hope to rebuild a squad?? We're basically f-ed - which members of our squad a valuable/good enough to sell on at a high value?

Roll on league 2

Why was my post deleted. I only said that his knowledge of the number of people in South Wales was wrong and that he must be on drugs if he thinks we could get a billion people from the far east into cardiff city?

ps interesting read though.

Very worrying. It seems the only way out of this is to sell our biggest "stars", and build again. Hopefully then we can learn from our mistakes from the last 10+ years, and become a bigger and better club for it

I noticed you posted this on the previous thread on this matter. How did you come to the conclusion that the ONLY way out of it was to sell players? The piece itself is giving us another way out of this.

Where exactly has this report shown another way out ffs. One sentence he's saying cuts have to be made to stop loss, but they still hope to rebuild a squad?? We're basically f-ed - which members of our squad a valuable/good enough to sell on at a high value?

Roll on league 2

Unless I mis-read it, I think it's the little bit about finding new markets and income streams in the Far East. But don't let that spoil your 'angry little man' stance.

The one thing that has united fans of both Cardiff and Swansea is the dislike of the S Wales big club plastic, both clubs wouldn't have suffered like we have if the people of S Wales had supported our clubs instead of the PL giants. How ironic them that your plan for survival centers around making your club the ultimate plastic commodity. Goodbye to a proud club with a reputation for having proud passionate real fans, hello to an attempt to manufacture a brand thousands of miles away with people who have never been to a game. Sad


BTW what sort of crowds have your pre season tours to the far east generated?