After much recent online speculation about the financial situation at the club, we think it is important for transparency now that there has been an announcement by the Interim Football Club Board.
The TJF Chair was recently asked a good question by a member relating to funds from TJF to support the club in other ways, ie working capital and overheads. This overlaps with much of the financial speculation which has been present online and in the stands in recent weeks and so we thought we should explain the present position as best we can. We do not speak for the Club Board in terms of anything which follows.
To explain where we are, we firstly need to take a step back and consider three consistent points which TJF have made throughout the fan ownership journey.
The need for the shares to be gifted whilst the club was being run on a ‘sustainable breakeven basis’
This point was made repeatedly to Three Black Cats representatives by successive TJF Boards throughout the process of negotiation for the shares. The concept of course being that if a budget was balanced, then additional funds raised by fans would improve matters, rather than be funding losses, or debt. In fact, supporters would then be able to choose how to spend members’ funds.
Some speculation seems to be that funding sources have ceased since the transfer of shares to the Trust, or since the change of board. We have no evidence that any tangible realistic sources of funding have ceased since these changes, and indeed the TJF support has been additional funding. It should be remembered that at the most recent AGM, it become apparent that significant promised funds had not in fact been forthcoming from the promised sources, and that was a major contributing factor to the operating loss last season.
We are well aware of considerable input of time by the new board on financial matters. As has now been alluded to in the Club statement, if the share transfer was made to the Trust on a basis which was not ‘sustainable and breakeven’, this would be disappointing given on how many occasions this was mentioned to be of importance to the representatives of Three Black Cats during the process.
The need for due diligence
It was also the case that both boards of TJF (often supported by professionals and industry experts) were of the view that due diligence was paramount, even though this was a gifting scenario. Three Black Cats did not agree. It was always perplexing to TJF directors as to why that was the case, as it seemed it would protect both parties.
We believe had due diligence been done as repeatedly requested, the supporters would have greater transparency and confidence sooner, which would have reduced the speculation we have recently seen.
The reason we believed this to be of importance was so that the supporters went into fan ownership with their eyes wide open to what lay ahead, and to confirm the previous point regarding the club operating on a sustainable breakeven basis. It would also have meant that no unwarranted blame could be allotted to the outgoing owners (or, as has transpired, outgoing Board). It would have protected all.
The hard work which has been done by the Football Club Board recently is effectively that due diligence process, but after the share transfer rather than before it. We have supported giving them the time and space to conclude their full assessment and implement any outcomes. We do understand these things take time and we appreciate the extent that the TJF Board has been kept up to date so far. However, it is inescapable, that a due diligence process would have avoided much of this and let the fans know what they were getting into.
The need for a margin of safety
When the Club produced their audited accounts for the year ended 31 May 2022, there were a number of matters which seemed inconsistent with the narrative at the time. TJF produced a commentary narrative on the accounts, and circulated that to all members. It remains available on our website here and sections 3 to 5 are of most relevant interest.
Despite some misleading proclamations, the Net Current Assets and Cash Reserves had both been greatly reduced, and the Current Ratio had fallen to close to 1, which we highlighted as an issue for the future.
At the AGM, there was a plethora of questions on this topic from a number of shareholders and TJF representatives as proxies. There was not a feeling in the room these had been well answered.
Given the history of recent loss-making by the previous Board, and the financial situation carried forward into this season as explained above (and now inherited by the new Board), that the Club’s financial situation is now described as “challenging” ought to be a surprise to no-one. Most certainly not anyone who can read Accounts or was at the AGM. However, we again stress that we support the new board making appropriate assessment and implementing an appropriate plan.
Whilst the Club Board continue the important work on rebalancing the budgets, it is important to note that the financial challenges mentioned in the Club Board’s statement are not due to fan ownership. Some are keen to make a link that does not exist for whatever reason. We have confidence that our members can work out why that might be.
In terms of the future, TJF have been in discussions with the Club Board about contributions to the budget in future years so that the Club can factor that into their own long-term budgets and financial planning. TJF have pledged significant funding for future seasons (subject to member approval). This is why we encourage fans to join TJF, and to support us financially, as into the future this will be an important, significant and regular recurring revenue stream for the club.