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The following
is an interview with a Finance Director of a UK football club.
It was published
in CIMA's Management Accounting in July 1999
Ian Herbert
interviews Andrew Mackenzie FCMA, a man with one of the most enviable
jobs in accounting!
Q. Have you
always worked in football finance?
A. No,
not at all. My background has been extremely varied. I've spent
a good deal of time in the construction sector and that's how I
came to join Derby County 3 years ago. I joined the club in 1997
to oversee the project management involved in developing the new
stadium. This was a contract for £16 million initially, with a build
time of only 18 months - fast and hectic. Once the building programme
had been completed I was offered the post of Finance Director. My
life hasn't been quite the same ever since.
Q. Could
you briefly describe your job.
A. I
think I could describe the biggest part of it in one word, 'talking'.
Or should I say more precisely, communicating verbally. In this
business things move extremely fast. A large part of my job is to
keep everyone informed; management, the directors, financial backers,
our shareholders, the fans and the public. People want information
and invariably they want it straight away. They want information
that is relevant to them and in a way that makes sense to them.
Most importantly, they want to hear you saying it. That last point
might sound odd, but investors particularly pick up as much from
the way that you tell them, the tone of your voice and your body
language, as they do from the information itself. Written reports,
while precise, are too slow and have no human feeling to them.
Q. What qualities
do you need to be a successful FD in the Premier League?
A. Following
on from the last question, the ability to communicate to a wide
range of people using a number of different means, together with
the ability to do several jobs at once. My day is extremely fragmented
with almost continual interruptions. In computer jargon it's called
multi-tasking, which I suppose is a good way of making chaos sound
structured!
Q. How would
you describe your role?
A. I
have a number of different roles. The primary one if to look after
the finances of course, but during the week I'm also responsible
for overseeing much of the administration that takes place. In addition
to a playing staff of 37, over 150 other people work behind the
scenes on ticket sales, administration, marketing and catering.
On a match day this increases by a further 350 people, mostly in
catering and crowd marshalling. The conference, catering and exhibition
activities are now generating a lot of business, as is the merchandising
operation.
As the complexity
of player's contracts increases, I am increasingly involved in the
financial aspects of the negotiation packages.
On a match day
it's the turn of the marketing people to ensure that the club extends
a warm welcome to the visiting officials, press and members of the
opposing team. I play my part in that hospitality process, as well
as cheering along the team of course.
Q. What support
do you have (in the management accounting department)
A. I
have two qualified management accountants who run the day-to-day
finances and prepare the budgets and monthly accounts. Further accounting
and clerical staff in turn supports them.
Q. What
are the main issues in football finance at the moment?
A. Number
one is staying in the Premier League. The chasm between the top
and bottom in football is still widening at an alarming pace. To
illustrate that point, television sponsorship of the 18 clubs in
the Carling Premier League is currently running at £195 million
per year - the exact share per club is dependent on finishing position
in the table and the number of television appearances. Below that
the 74 clubs in the Nationwide League share £27 million per year.
Evidence of this polarisation of the game is growing tendency of
the relegated Premier clubs to get promoted the following year,
but then struggle again in the higher league, the 'yo-yo' effect
as it's called.
There is still
a lot of money coming into the English game at the moment and the
current take-over proposals and rumours surrounding the top half
dozen clubs is providing another impetus to the need to stay ahead.
While the proposed takeover of Manchester United by the News Corporation
has fuelled further financial interest in the sector, the market
valuation of some clubs has actually been falling recently. On the
day Manchester United bought Dwight Yorke from Aston Villa for £12
million (August 1998) the market capitalisation of Leicester City
FC was approximately £11.5 million.
Secondly, the
'Bosman' ruling in the European Court of Justice (where players
over the age of 24 become free agents at the end of their contract
period) has yet to have a full impact in England. The anticipated
effect is that transfer prices will soften, with the available funds
for player acquisition being diverted into player earnings. However,
the present strong demand for quality players is still outstripping
supply. Transfer fee inflation is still rampant at all levels, but
at the same time the implications of limited contract life are being
reflected in the upward movement of player's wages.
Finally, as
more clubs prepare for possible flotation there is increasing pressure
to reflect the value of 'home-grown' talent in the balance sheet.
Of course FRS 10 forbids such valuations. While this might be understandable
from a strict accounting perspective it could lead to examples of
dysfunctional behaviour. Suppose for example your star player has
historically cost the club nothing but is now worth £10 million.
There might be a strong temptation to sell them and buy a replacement
of equivalent value. Then, hey presto, the club's value increases
by £10 million.
The following
statistics may help to provide a better idea of the current dynamics
behind football finance.
In the 1997/98
season
The English
game lost £43 million
English clubs
spent £250 million buying players, of which Premier League clubs
spent £178 million
Premier league
player's wages grew by 35%
Twelve clubs
had wage bills exceeding turnover A further 35 clubs had wage bills
exceeding two thirds of turnover
Q. Is there
ever a temptation to get too involved in the fortunes of the team?
A. Of
course. Winning and staying in the top flight are desperately important.
Its always a temptation to think that if we only had one more player,
then perhaps....... Accountants are always type-cast as the people
who like to say no. But football is a business, and business is
about making better decisions in the long term than the competition.
My job is to make sure that the decision making process is structured
and based on objective criteria wherever possible. I don't make
the final decisions but I do have a responsibility to ensure that
all the facts and options are quantified and presented in a way
that everyone can understand and relate to. If that means saying
no in some people's view then so be it.
Q. What advice
would you give to anyone seeking a job in football finance?
A. You
must be able to demonstrate that you have a positive mental attitude
and that you can handle pressure. The ability to communicate at
all levels in any manner is crucial.
Q. And finally,
combining finance and football must seem like a dream job to many
people what do you do in your spare time?
A. I
watch rugby. Leicester Tigers of course!
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