Argyle have released their latest financial report.[You must be registered and logged in to see this link.]
Having changed our accounting period to align with the EFL season, the club is in the process of submitting accounts at Companies House for the six-month period between January and June 2019.
In line with club Vision and Values of Honesty, Openness and Integrity, Chairman Simon Hallett and Director Paul Berne have written to the Green Army to outline the details of the club's financial position for this accounting period.
Of course, the report outlines the club's financial position from the summer of 2019, and does not reflect the fast-changing environment in which the football industry currently finds itself in.
The headline figures from the six months leading up to June 2019 evidence that:
The club made a loss of £1.4m
The fixed assets of the club increased by £4m in the year
The club has net assets of £6.7m
The club had £4m in the bank at June 30 - although much of this was ringfenced to be spent on concluding the development of the Mayflower Grandstand, which opened in January 2020.
60% of the club's revenues come from match-day activity.
Please read on to find a letter from Simon Hallett, and a detailed report from Paul Berne.
Hi all, I hope you remain safe and well as we continue to navigate the challenges of the current situation.
Following this note from me is a letter from the Argyle board discussing our financial report for the half year to June 2019, which has just been lodged at Companies House.
Since June 2019, of course, much has changed. On the positive side, we have put ourselves in a good position in our pursuit of a return to Sky Bet League One, got a new, dynamic, coaching team, and successfully completed the refurbishment of the Mayflower Grandstand.
On the negative side, the world has changed dramatically from that reflected in the financial report to June 2019.
While the whole world is in the middle of a humanitarian and economic disaster that has left hundreds of thousands of people dead, and many more facing the loss of their income, football is in financial crisis. The importance of that crisis is clearly secondary, but one that the board of your club has a responsibility to address.
As the letter discusses, at Argyle we generate over 60% of our revenues on match-days. With arguments raging about how to end the season, it seems to have been forgotten that, until teams in Leagues One and Two are back playing in front of their fans, there are insufficient revenues to meet the costs of running a club - including paying wages at anything like the levels we have seen in the last few years.
As I said in my last letter to you, Argyle is stronger than most clubs, but not invincible, and cannot avoid the existential problems that face all football clubs.
We will continue to be as transparent as we can and explain to you how the board proposes that Argyle survives this financial disaster facing us all, but at the moment our strategy is not yet fully formulated.
The board is preparing for all scenarios, but there are so many questions yet to be answered that we can’t say for certain what our response will be. We are awaiting guidance from the EFL on the ending of last season; promotion; salary caps, and transfer windows for example, and we clearly have no idea when football can actually start again.
Our plan is to keep you in touch with developments as they happen. I will write to you again when some of these questions are answered and we can formulate our strategy. We will then hold another online Fans’ Forums to discuss these issues and answer any questions about our plans.
I am sorry I cannot give you any greater reassurance or guidelines as to what the future holds. Like you, we simply do not know yet. What I can assure you is that when the uncertainty ends, we will be able to respond quickly and that we will communicate that response to you.
Until then, stay safe. We appreciate all of your support as we face these challenges together.
As you know, we at Plymouth Argyle are very keen to be completely transparent about our finances, and so we would like to explain our financial position, and how these accounts fit into that.
Overall, it is fair to say that the club is still not yet financially sustainable – and relies upon the financial support of the shareholders, which predominantly means Simon Hallett.
Despite this, financial sustainability remains the short to medium term goal for the club – and a goal we must remain committed to. As grateful as I am sure we all are for Simon’s support, it is vital for the community, and for future generations of the Green Army, that we have a club that can stand on its own two feet.
Let us set out the main points:
The Accounting Period
Firstly, the accounting period, which the filed accounts covers, has been changed. Previously, the club filed accounts each calendar year, with the accounting year ending on December 31.
We have taken the opportunity to change the accounting year end so that it is more in keeping with the football season. This makes sense for all sorts of reasons – not least because it makes the accounts easier to understand for everyone.
So, this set of accounts covers a shortened period. Rather than 12 months, this set of accounts covers the period from January 1, 2019 to June 30, 2019. From now on, each set of accounts will cover a full year to the end of June – in line with the football season.
So, what do these accounts show?
They show that in the six months to the end of June last year:
The club made a loss of £1.4m
The club has Net Assets of £6.7m
The club has £4m in the bank at 30th June
The Fixed Assets of the club have increased by around £4m in the year.
However, in these accounts it’s difficult to display the key things that are really happening with the club’s finances, as they cover such a short period, and a period in which so much changed at the club.
The key things to highlight are:
Why are there such big losses?
The truth is that costs still outstrip income at the club.
Put simply, when we add up our income (which comes from tickets, cup runs, transfer income, hospitality, the football authorities, and things like sponsorships), we are spending more on a combination of stadium upkeep, costs of running each matchday….and, of course, the player wages.
We will explain where the money comes from, and where it goes shortly.
In this six-month period (January – June 2019), things were made slightly worse by a number of “one-off” costs:
We changed our first-team manager, and coaching staff. That obviously has some cost implications – both in the release of the previous team, and in the costs of bringing in the new team.
The Mayflower Grandstand was still under construction. That meant that we were still paying for temporary elements (changing rooms, hospitality, etc.), and the ground was not able to be used as it would “normally” be.
These two things added quite a lot to the club costs in the six months – around £600,000.
That means that the underlying losses aren’t quite as great as in the accounts – but the club would still be losing money – around £800,000 for the six-month period.
What do the assets mean? And why have we got money in the bank at the end of the season?
The other significant factor in these accounts is the building of the Grandstand, along with the cash to pay for it.
You will know that the new Mayflower Grandstand opened officially on January 1, 2020. It was operational for some test events leading up to that time, but had been under construction for some time.
At the time of these accounts, the Grandstand was still being built. A lot of it had been done, but there was still a good way to go, and – importantly – still a lot to pay for.
Therefore, in readiness for this payment, Simon transferred money to Plymouth Argyle, to cover remaining costs (that were paid for during the period between July and December 2019 – after this accounting period).
Simon did this by loaning money to the club, which was then converted into shares in September 2019.
Where does the money come from?
So, in order to help understand where the money comes from at Argyle, we are going to re-analyse the numbers into the relevant football seasons (rather than the accounting periods ending on December 31)
The chart below shows where the money came from over the last three seasons:
As you can see, ticket income is the biggest part of our revenues. It has been over 40% of all our income in each of the last three years. When you include income from programmes, catering, hospitality – 60% of our income comes from fans coming to the game, and supporting the club.
Simply put, the most important source of income for the club is you – the Green Army. The continued support of every fan is vital for our club.
The club does get monies from elsewhere – as you can see. The next largest chunk is from football income, which includes any monies we get from being part of the EFL, in addition to monies helping to support the Academy at the club.
Finally, you can see all the other key elements which make up the income. Each might be relatively small, but added up they make quite a difference to the club – and the club needs every single one. Whether it is matchday catering, or revenue for the club shop, to sponsorship, every penny goes towards the running and management of the football club.
You can even see where we receive TV money – as the 2016/17 season includes our games against Liverpool, providing some extra income in that year.
Where does the money go?
OK, so we know where the money comes from, and Argyle is one of the better supported clubs in Leagues One and Two - so where does all that money go?
Again, to help understand this, here are the breakdown of the costs for the last three seasons (reorganising the finances into seasons, rather than accounting periods):
Probably unsurprisingly, most of our costs (as for almost all football clubs) are spent on wages. As we don’t want to give away anything too competitively sensitive, this number doesn’t just represent footballers wages, but the wages of everyone who works at the club – matchday staff, admin staff, football management and coaching, as well as the players. Every one of these people is vital to the successful running of the club.
It is worth noting that the directors do not take any payments from the club, with the exception of, Andrew, the chief executive, who is a full-time employee of the club. All other directors give their time voluntarily to help the club.
Also worth noting is that, as a sizeable club with a good (and improving!) stadium, the costs of running the stadium are also required. Maintenance, improvements, repairs – these things are all needed to keep Home Park a safe and pleasant environment.
Finally, football costs are part and parcel of running a club. From equipment (balls, goalposts) to the academy facilities, there is a cost to running a football club.
Are costs greater than income?
So, we know where the income comes from, and where it goes.
The painful truth at this stage is that costs are greater than income. The chart below shows that – for the past three seasons – costs are greater than income. During the 2016/17 season, the club did make a profit (partly thanks to those Liverpool games), but this has been subsequently swallowed up in the following two seasons.
Argyle are not unique in this regard. Many football clubs make losses. However, it is the aim of the club for this not to be the case – we want to be a club that stands on its own two feet, financially speaking. This is something that we must achieve to provide a secure future for the club.
What does the future look like?
It is important that the club is open and transparent about its finances, and hopefully this helps to achieve that. We would prefer to talk about these things at a Fans’ Forum, but in these times, it’s been a little easier to communicate this way. Of course, we can answer any remaining questions at our next Fans’ Forum, whether it be at Home Park or online.
We are committed to transparency about our finances, and will repeat this exercise next year.
Obviously, as this is being written, there is no football at Home Park – or anywhere else in the UK. It is hard to know when we will see games live at Home Park again.
What is clear – as you will agree – is that football clubs at this level are reliant upon playing games in front of crowds. The revenues for any football club in League One or Two are reliant upon playing games, in front of paying fans. Clearly things are changing in football, as the game tries to adapt to a world after this COVID-19 crisis.
Clearly, this information is historic, as it covers the period up to June 2019. The world has changed so much since that time, not least because of COVID-19 – and the effect this has on football is significant.
The future finances for Argyle are far from certain, just like many football clubs. The club (the board and the management) are currently working to find ways to survive through this time of uncertainty. This is not an easy task, and has got an impact on all aspects of the football club. There are no revenues if there are no games. The club cannot sustain in that way forever.
Of course, things will develop, and the future of the club is the most important thing here. We can all play our part in supporting the club as we move forward.
As things become clearer, Simon will write with an update, ensuring everyone is up-to-date with what is the current status, and what can be done to support the club.