Plymouth Argyle should have been preparing for a first league meeting in eight years with Exeter City this week. Instead, their biggest match of the season is on Wednesday instead of Saturday and takes place in the High Court, not on the football pitch. The Pilgrims are the latest club to head to court after HM Revenue and Customs issued a winding up order and when one potential savour is Peter Ridsdale, you know matters are grim indeed.
That Plymouth should find themselves in court is a testament to how badly the club has been run in such a short space of time. Just a few years ago, Argyle were held up as a model of a regional team competing well in the Championship. Indeed, as recently as 2007/08, the Pilgrims announced a £1m profit, while the prospect of hosting World Cup matches at Home Park was a genuine possibility.
Today, though, the club are somewhere between £7m and £9m in debt, with the exact amount unclear. In 2008/09, the club made a loss of £2.8m, and when the 09/10 accounts will be published, that loss will undoubtedly be far higher.
Two seasons ago, their wage bill was higher than Blackpool’s currently is in the Premier League, and that wage bill has now becoming crippling for the club. High earners like Bradley Wright-Phillips are on several thousand pounds a week, while their total wages-to-turnover ratio is surely higher than Deloitte’s recommended 60%.
Ironically, one of the reasons Argyle find themselves in this situation is due to a reluctance to splash the cash four years ago. At the time, Plymouth were managed by Ian Holloway and were threatening the playoffs, but Hollyway left after a disagreement with then-chairman Paul Stapleton over additional funds for a promotion push. Paul Sturrock then returned for a second spell at the club and although the high wages remained, the quality of the players didn’t.
Argyle, in their reluctance to spend to make the Premier League, ended up stagnating and spending to stay in the Championship. It failed, and neither Sturrock nor his replacement Paul Mariner could keep the Pilgrims in the second tier, and they slid towards League One, with a large number of the squad contracted on Championship wages.
Of course, it’s not just the wages that have hurt Argyle. Like many clubs in crisis before them, the stadium plays a large part in their current story of woe. In 2006, the club, headed by Stapleton, purchased the freehold of the stadium from Plymouth City Council, with ambitious plans to redevelop the Mayflower stand and beyond.
Those ambitious plans became more so when Argyle submitted their plans to become one of the host cities for England’s 2018 World Cup bid. The Devon city made the shortlist, while their plans included a £50m development in and around Home Park, which would be increased to a capacity of 46,000. Even relegation didn’t disrupt the board’s plans, despite critics warning of the potential for a white elephant.
In some respects, although England winning the World Cup vote would have undoubtedly regenerated a lot of the city, missing out on 2018 has saved Argyle from building a stadium that would have, as likely, been too big for their needs. This season, the Pilgrims have been averaging crowds of 7,192, with a season low of 4960 coming against Dagenham and Redbridge last month.
When purchasing the freehold, Argyle took out a mortgage with Lombard on Home Park, and this company remain the club’s biggest creditors. Last month, Plymouth’s current chairman, Sir Roy Gardner, took out a further £400,000 mortgage on the ground.
Gardner, along with executive director Keith Todd, have been keen to push forward a plan for a separate company to purchase Home Park from Plymouth Argyle, ostensibly on the rather strange reasoning that it would make it easier for banks to lend money to this company rather than the club as a whole, with regard to the redevelopment, but separating the ground from the club.
However, at this point in time, the purchase of Home Park appears to have stalled. As a strange side note to this, Home Park Properties Limited, the company that was set up in order to purchase the ground, also faces a winding-up hearing on Wednesday.
HPPL was only formed in January, so no accounts are available for it, and has no assets of which to speak, so it’s anybody’s guess what this debt is over. To complicate matters further, HPPL is one of seven known companies associated with Argyle. Fourteen months ago, there were only two companies connected to the club.
The board at Plymouth appear to be reluctant or unable to provide any further cash. The club’s biggest shareholder, Yasuaki Kagami, who owns 38% of the shares in Argyle’s holding company through his K&K Shonan company is said to be a multi-millionaire, but it’s unclear how much, if anything, the Japanese has put into Argyle.
In October Keith Todd claimed that Kagami, who has yet to watch the Pilgrims play since taking a stake in 2008, hadn’t invested any funds into the club since July 2009, although last month Argyle’s Chief Operating Office Tony Campbell said the CEO of the Maruka Corporation had “injected significant funds.”
Meanwhile, the clock still continues to tick towards Wednesday’s court hearing over the debt to HMRC, estimated to be around £700,000. With their bank account frozen and no apparent new money coming into the club, the future looks bleak for Argyle.
The club have missed payments to the company that installed their new pitch - the first part of the proposed redevelopment plan for Home Park - and many of the staff at Argyle have been told they are likely to be made redundant, as wages were not paid last month.
To top this sorry saga off, Peter Risdale, of Leeds and Cardiff fame (and none-too-popular in either of these two cities) is helping as an advisor, despite Todd insisting only last month that his presence at Plymouth games was a pure coincidence.
Risdale is not on the board but is apparently helping the search for investors, and it is unclear what his long-term intentions would be towards the club. Initially welcomed by Pilgrims fans as a potential white knight, the mood has soured towards the former Leeds and Cardiff chairman after fans of those two clubs spent plenty of time on Plymouth message boards detailing exactly what state Risdale had left their clubs in.
The sensible thing would be for Argyle’s directors to voluntarily put the club into administration (assuming Lombard, as the biggest creditor, don’t decide to do this for them). Although painful in the short term, with the mandatory 10 point penalty increasing the likelihood of a second successive relegation, it would at least secure the short-term future of the club.
But the noises coming from Plymouth suggests the club will go up before the court and request a 56 day extension while they search for new investment. This is a risky strategy, as no potential investors have yet materialised. If the judge cannot be satisfied Argyle are not hopelessly insolvent then the club will be wound up and liquidated.
If that happens, then the struggles of Peter Reid’s men on the pitch will seem irrelevant. If Argyle are wound up, it will be a bitter irony for Green Army supporters that their final match - assuming they survive that long - will be against their bitterest rivals, who came so close to extinction themselves seven years ago. Exeter City fans may have little love for Argyle, but they can surely empathise with their rivals’ current predicament.
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Tags: Home Park, Keith Todd, Peter Risdale, Plymouth Argyle, Sir Roy Gardner, World Cup 2018, Yasuaki Kagami
For what it’s worth, I don’t think Plymouth Argyle will be wound up this week, and they will get an adjournment, although not for the 56 days they’ve asked for. That said, HMRC have been gunning for football clubs for a while now (and with good cause) and it wouldn’t be a total shock to see the judge rule in the taxman’s favour.
This is Plymouth’s 3rd winding-up petition from HMRC in 12 months.
Football, as an industry, has taken the p out of the taxman for years now. How many times has a club gone into administration, taken the points deduction, and had a new board come in and clear all the football debts in full, but given everyone else (who the taxman is normally the largest) just 10 or 20p in the pound. The country’s skint, HMRC are taking every penny they can possibly get from everyone and it wouldn’t surprise me to learn that HMRC wish to make an example of a club. They daren’t go after a big club like Leeds, Liverpool or Portsmouth, and there’s not point in taking out another Maidstone, Aldershot or Newport County. Plymouth, as one of the larger lower league clubs, fit the bill perfectly.
I’m hearing they may go into administration this afternoon.
I think the taxman would have loved to (and quite rightly, given that clubs have to pay taxes like everyone else) make an example of Portsmouth. But the situation there was so complex and HMRC’s debt wasn’t enough to force the issue. I don’t think they don’t dare, but the situation was more complex.
At Argyle, it’s still complex but a bit clearer in terms of where some of the debt lies and the cashflow situation. And, as you say, they’re still a largeish scalp.
This day has been coming for a long, long time - From being hailed as the “best financially-run club in the Championship” by Deloitte’s (http://beta.thisisplymouth.co.uk/news/Argyle-league-says-Deloitte-s/article-181359-detail/article.html) in 2008, the wage caps that saw several stars leave in the 2007/08 season were well and truly broken through, albeit for inferior players - resulting in very poor performances and dwindling attendances.
The board attempted to halt this slide by throwing even more money (combined with lucrative 3 or even 4 year contracts) at very average players, who performed just as abysmally as the last lot, culminating in our relegation last season, and the subsequent loss of a further £2m p.a in TV money (no parachute payments from this league!).
The net result is a team languishing just above the drop zone in league one, with a wage bill higher than Blackpool’s premiership squad, and attendances of sub 5,000, compared to regular 17,000+ crowds a few years ago.
Put simply, we’re a club in decline and I don’t think we’ve hit rock bottom yet. Until we do, everything else is simply a sticking plaster in the bloody great hole in our finances.
There is no doubt that the recent Board have mismanaged affairs quite badly. But the stance of many fans to fail to renew their season ticket or stay away to register their disgust is just as big a factor. When Man City tumbled down the leagues a few years ago they still kept most of their First Division attendances. Same with Leeds; they suffered a drop in support but nowhere near the 50 to 60% we have seen at Home Park. We have to take the highs and the lows - it is cyclical and only one team out of the 24 in the division can win it. Only six can be in the final promotion and play-off places. 5,000 extra at each of the next two home games means an extra £100k at the gate.
You’re quite right about HMRC’s tougher line. My club, Dundee FC, went into administration in October largely because HMRC forced their hand. The debt to HMRC that the club had allowed to build up was irresponsible and unjustifiable, but HMRC clearly adopted a much harder stance than they’d taken previously.
Last year it was revealed in passing during a court case involving Hamilton Accies that they’d had a long standing tax debt of £275k dating back at least seven years, and that they had an agreement with HMRC to pay only the interest on that. That was bizarrely generous, and I don’t see how HMRC could justify that to their political masters.
Dundee’s debt is a similar size, and they had an agreement to clear it by next summer. HMRC changed their mind when they saw that Dundee’s main financial backer had problems with his business and demanded the full amount immediately.
Of course the administration process means that they might well end up with far less than if they’d waited till the summer, but Dundee’s problems will send out a scary message to other clubs. Presumably HMRC think it’s worth taking a hit with a few clubs if it puts the frighteners on the rest.