The TJF Board was invited to a meeting around the time of the formation of the Interim Club Board last year. At that meeting, Duncan Smillie referenced our reports on finances and informed us, and we paraphrase:
“The good news is you have proved you understand accounts because, you were right. But the bad news is you were right.”
This was partly due to our commentary on last year’s Club accounts and partly due to the questioning of the then Board and Auditors by us, and others, at November’s Club AGM.
We take no pleasure in being right. You know us. We stood with you on Sunday. We are fans and we are hurting, and we know it’s a bad time to be having a difficult conversation with you all. This is the hard part of fan ownership.
The scale of the problem
During all our dealings with Three Black Cats Limited, we made the point often that the Club needed to be handed over on a sustainable breakeven basis for fan ownership to have the best chance of success. It has not been. No spin or PR, these are the facts. Hopefully, we have earned your trust by always communicating honestly with you.
There is a further problem. There was a prudent margin of safety inherited by the previous Board. This was a good thing. Whilst we were right in warning about the erosion of working capital and the threat of that margin of safety being removed, even we were shocked when we learned the true extent of how bad the financial position inherited by the Interim Board turned out to be.
A cashflow crisis and eye-watering operating losses
If it had not been for a penalty shoot-out victory and a fortunate Scottish Cup draw, the February wages would not have been able to be paid. If it had not been for a committed supporter investing into the club in May, even after the close to £300,000 unbudgeted revenue from the Rangers Cup game, we would not have been able to comfortably pay the May salaries.
When the 2022/23 accounts are prepared, they will report a loss despite the good fortune of close to £300,000 of unbudgeted revenue from the Rangers Cup tie. Without those proceeds and the late season investment secured from a committed fan, the cash position would have been negative.
Without the proceeds of the Rangers Cup tie the Accounts would show a loss of between £550k and £600k this season. Even after the money from that Cup tie, the loss for the season is expected to be around £280k as detailed by the club in their statement. This is how far awry our Budget was for this season.
We did not have any margin of safety coming into this season due to the profligacy and losses of the recent past – so we had to get lucky with unbudgeted, unforeseen income or find investment, or both. This systemic budget deficit now gives us problems for the coming season too.
What is TJF doing about it?
We at TJF have therefore committed to the following things:
- We will be paying £50,000 lump sum to the Club
- We have been consulted during the Club’s budgeting process and pledged £135,000 in regular payments during season 2023/24, and increasing amounts beyond then. Our donations come free from VAT to the Club.
- Even with £185,000 from us over the next 12 months, there is a shortfall as we started under-capitalised for fan ownership. The Club needs to rebuild working capital and margins of safety. TJF will therefore support and assist the Interim Board in securing investment in any way that we can. This needs to be a significant number (ie £500k plus).
- We have advised on our thoughts on Board Composition for the future to maximise the potential for a skills-based Board in the future, with the hope to never have a repeat of the mistakes of the previous board.
How you can help us to help the Club
To do this, we need your help. At present TJF generates less than the committed £135,000 per annum after costs. We know it is a terrible time to ask with the cost-of-living pressures on us all. But unfortunately, it is time once again for the supporters to Save The Jags due to the actions of others. It’s not fair. However, these are the facts and the responsibilities that come with fan ownership.
We would ask you all, where you can, to:
- increase your monthly contribution where you can
- support future fundraising initiatives
- purchase your season ticket from the Club
Tough times ahead
Kris Doolan is our Leader, and we need to support the Playing Budget to the greatest extent possible. The financial reality is it will be cut even with our pledged contributions. The culture of over-spending and loss making has to come to an end. We have no reserves left to sustain it any longer. Others have spent through every last crumb in the biscuit tin.
We always said during negotiations that the fan ownership entity should be a relentless fundraising vehicle for the football club – something which was not accepted by Three Black Cats. The restrained but impactful Club Statement on financial disclosures demonstrates exactly why we need to be, and we stand ready to be such a vehicle. It also justifies why our calls for due diligence were of such importance to us.
Why are we only hearing about this now?
The Club Directors asked TJF for time to explore solutions to the cashflow challenges and budget deficit. We agreed to provide that time, against our natural instincts. We wanted to give the interim board the best chance of succeeding, and to demonstrate (on our part) an understanding of the responsibility which fan ownership brings. We therefore, reluctantly, agreed that financial transparency should come after the conclusion of the playing season so as not to provide a distraction or to impact on-field performance.
As part of the process, two TJF directors (Sandy Fyfe and Andrew Holloway, both Chartered Accountants) signed Non-Disclosure Agreements with the Club, further stifling our ability to communicate. However, this provided an important basis for building trust between TJF and the Interim Board, and allowed more commercially sensitive information to be shared and analysed with Sandy and Andrew.
What went wrong?
Please be assured these problems have nothing to do with fan ownership and are entirely to do with the conduct of the previous Board and the oversight and scrutiny they received from the custodians of the shares. The cash flow challenges arise directly from these actions (and inactions)
- Lack of appreciation of cash flow peaks and troughs
- Budgeted/Promised funds not materialising (a repeat of what happened in 2022)
- Technical errors in budgets prepared
- Poor budgetary control. (To reassure you, the Interim Board have restored Budgetary Control since being appointed)
There is one final problem. Due to the shares resting in a Trust, there is a need for the company it holds shares in (PTFC) to operate profitably by 2025 (or at breakeven at very least). Otherwise, the Trust owning the shares could be liable to a taxation charge. It is of course disappointing that we have ended up with such a challenge. But it is an extra incentive – if one were needed – to create an annual six-figure sustainable revenue stream for the club through TJF. Let’s work together to make the club sustainable so that funds flow to Doolan for squad building rather than to the tax man!
A call to arms
TJF endeavours to be a responsible, accountable and professional fans organisation. However, it has been an emotional time sitting in the stands with you all whilst knowing what has been done to our football club. So please allow us a little emotion. Despite numerous challenges, we have survived since 1876. Yet financial irresponsibility could have seen the demise of our club this season. Frankly, and if you forgive us for being overly emotional for a moment, we hope that no-one involved in almost ending that 147 year history of our football club ever shows their face at Firhill again.
Its time to pull together, support our manager, dig deep where you can, and take pride in Saving the Jags again. Thank you all.