In late April 2009 Cullum announced preliminary pre-deduction 2008 earnings figures for Towergate (ebitda, in the jargon) of just over £100m. This was slightly higher than the equivalent figure for 2007. After those various deductions that 2007 ebitda figure had translated not into a bottom-line profit but a loss – of just under £13m.

The Towergate press release did not mention profits for 2008 but the EDP headline writer seemingly mistook editda for profit and had Towergate making a profit of £100m. They are two entirely different things, and a profit of £100m on ebitda of £100m would be highly unlikely, not to say impossible. The EDP later dumped “profit” from the headline, but not before the idea had stuck in some fans’ minds that Towergate was, as one put it, “still massively profitable” despite the recession.

A similar response came from John Tilson, chairman of Norwich City Independent Supporters' Association: “We are now on the brink of relegation and this could reopen the whole debate among Norwich fans about the rights and wrongs of the Peter Cullum affair. The last thing a lot of people expected was for a company like his to be doing so well at the moment.” Except that without a profit or loss figure to complete the picture there was no way of knowing how well Towergate had been doing.

And on July 22nd the website broking.co.uk reported that Towergate had actually made a post-tax loss for 2008. Figures filed with Companies House put it at £6.6m. It must be stressed that a small loss like that is not necessarily particularly significant. It is relevant here because of the mistaken headline, and its unfortunate effect.

 

On June 17^th, Cullum announced that a subsidiary, Towergate Financial Services, had gone into administration, as a technical measure, with the business being merged into the parent company, because of “adverse economic conditions”. It had been launched 16 months ago to advise wealthy clients and businesses on managing their money. Looked at callously what really matters is not the fate of a subsidiary, but how well the core business is surviving the recession. The only slightly eyebrow-raising point about that subsidiary is that it was started up as recently as early 2008.

As to Cullum personally? In April he gave the Cass Business School £10m - purely coincidentally just the amount that would have covered the cost of buying Smith and Jones's majority shareholding. As for him and NCFC, his now long-standing public stance - that he is out of the picture - has not changed. But if some fans still harboured hopes that he didn't quite mean that, then his significantly-worded statement on May 1st should have killed those off: “The economic environment is simply not conducive to investing in an ailing football club.” Note the “ailing football club” phrase. Cullum’s attitude there, as it has been all the way through, is that not of a fan thinking with his heart but, as I made plain in my original story, of a hard-headed businessman taking business decisions. And this, I repeat, is in no sense a criticism.

May 2010

There have, unless hidden away, been no further public  comments from Peter Cullum on the subject of Norwich City following that admirably blunt “failing football club” quote. Towergate should be  announcing its annual results shortly, which will show whether it's back in the black after two years of losses. Perhaps this time the EDP will know the difference between ebitda and profit.

Finally, as what a cynic might regard as a suitable postscript to the whole affair, the voters of Norwich South sacked Charles Clarke, who was the man who suggested the idea of buying NCFC to Peter Cullum - "I had dinner with Charles Clarke and I then realised that the sole aim of the dinner was for him to persuade me to provide some finance for Norwich City."

May 28th, 2010

Towergate has now reported a loss (its third in a row) for 2009 of £15.1m, against the loss (reported above) of £6.6m for 2008. With Cullum predicting an equally tough year in 2010. This is not a man with time to buy a football club.

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3. New directors

The significance of the summer’s boardroom changes was underestimated by many fans in cyberspace. The status quo was a five-person board, with the other three directors being, in very rough terms, supporters of the owners. Not on every issue, perhaps, but generally of a like mind. The owners could have kept the status quo, or made some changes of personnel that did not alter the balance of power. Instead they sacked two of those supporters and installed three newcomers, deliberately ending what had effectively been their in-built majority. More than that, they appointed newcomers to the figurehead position of chairman and the crucial position of chief executive.

At a stroke Smith and Jones – who understand how boardrooms work - created a situation in which they could be out-voted 4-2 on every major issue, up to and including a recommendation to shareholders to accept a particular takeover offer. They could as majority shareholders then vote down such a recommendation, but they would find themselves in a difficult position in doing so.

Now, those two paragraphs above were written some weeks ago, before the sacking of Gunn. An event that bears out their truth. Only a fly on the wall would know precisely how those post-Colchester boardroom discussions went. However there would not have even needed to be an initial majority against Gunn or a split 3-3 vote for his position to be untenable. If only McNally was for sacking him that would probably have been enough. If you bring in as high-powered a figure as that you are giving him an enormous amount of de facto power. You have to listen to him. The others would have had to have come round to agreeing with him. To back that point up, this quote from him on his role in Gunn's firing is instructive:

"It would have been easier for me to sit back and say: 'Let's just hold tight and not take action...' But I think in the long run, the club would have been in a worse position. And so I believe it was my duty in my role at the football club to discuss with the Board the best way to progress the club.” There is a lot of “I” and "me" and not much "we" in those three sentences. And the “I” and “me” forcing the issue. Did Smith and Jones know they would be outvoted (if that is what happened) so soon? Impossible to say. But they knew they had made it a possibility.

4. Ownership

”Confused? You will be!” As the intro to Soap (a US spoof sitcom, for the benefit of younger readers) nearly had it. Despite seemingly contradictory statements, the position remains essentially the same, even if relegation has produced a change of emphasis in the boardroom. The club, as it has been since the AGM nearly a year ago, is up for sale but the owners will accept minority investment as well as or instead of majority investment. To emphasise this, the club issued a statement on May 19^th, following the departure of Munby and Doncaster as directors:

”As far as potential investment leading to a change of majority shareholding is concerned, once again the message from directors is clear. They would be delighted to talk to anyone who is prepared to commit to making a substantial investment into the football budget on an on-going basis in return for shares. No such person has actually made any such offer to the board, despite much talk in the local press suggesting otherwise.”

Short of taking a full-page ad in the Financial Times, it is hard to imagine a more obvious “We are for sale – come and buy us” plea. If the owners are willing to stop being the owners then the club is effectively up for sale. There is the long-term funding proviso, but then that has always been there.

Then, in the Canary Preview, Keith Harris, charged with finding investment, said the following:

”My brief is to advise [Smith and Jones] on the alternatives that are available. It’s a broad brief. They’ve not specifically asked me to sell the club. If anything their position has hardened that they’re going to stay there, see it through, and essentially what the clubs needs now is some injection of capital. Delia and Michael are at present the majority shareholders. It depends entirely on the form of capital that comes in as to whether they stay in that position or not. They have an open mind. What they’ve said is that they don’t want to sell, they want to stay with it, they want to see it back to a higher division than it unfortunately currently finds itself in.”

This rather muddled contribution, understandably, caused some confusion. But it is clear Harris is linking the “don’t want to sell/see it through” stance to the current season and the attempt to get back to the Championship. Smith and Jones, as was Bryan Gunn, seem not to want to end their Norwich careers on the low of relegation, which is what I was referring to by a change of emphasis in the boardroom. However Harris also makes plain his brief includes finding majority investment, because he says Smith and Jones are willing to accept just such majority investment – ie, to sell the club. “They have an open mind" on whether they stay as owners.

At the Capital Canaries agm in August there was the following confirmation from Wynn-Jones of that. “We need investment. Delia and I have no desire to be majority shareholders but we've had no offers.” So that is totally clear. The club is up for sale. Until, that is, the next question, to Delia. ”Is the club up for sale?” Answer: “No.” But, but, but! Your husband just said it was!

Confused? Quite. At the risk of a bit of amateur psychoanalysis, my suspicion is that, particularly in the wake of relegation, Smith and Jones simply don’t want to say out loud that the club is for sale, because it looks like an admission of defeat. But if they are willing to give up being majority shareholders, as stated by the club on May 19, and confirmed by Harris and confirmed again by Wynn-Jones, then the club is in practice on the block. Perhaps a form of words that they would settle for is that the club is not actively for sale, but it is available to be bought. It means the same thing, but sometimes a softer sounding phrase is more acceptable.

“We have spent the past six months in discussions with over 50 parties in America, Europe, the Middle East and the Far East. We are now in detailed discussions with several of those parties as to structuring further investment. As these matters are complex, I would not expect any further information to be available in the short-term.”

The obvious follow-up question, which Bowkett didn’t get round to answering, was whether this is minority or majority investment – ie a new owner. Or a combination of both.

There is a fans’ mantra – “Everyone else can find investment, why not us?” And there is Wynn-Jones, at the Caps’ agm, saying that “no-one wants football clubs”. So who is right? Various distinctions need to be made. Between Premiership clubs and the rest, between listed companies and unlisted, and between minority and majority investment. Plymouth Argyle, for example, has attracted Japanese minority investment as part of a 51 per cent takeover with UK businessmen.

Notts County – with the cachet of being the oldest League club in the world - was taken over by a Middle Eastern group, although the deal was later investigated by the Football League because it was not clear exactly who were the new owners. And on December 10th, 2009, the apparent owners put the club back on the market. The one certainty is that the supporters’ group, which effectively saved the club some years ago, had to make way to allow a sale to go through.

But Sheffield Wednesday, like Norwich publicly looking for investment, and seemingly an attractive proposition, is still searching. Ditto WBA, on the market for longer than NCFC. Ditto Glasgow Rangers. Ditto Crystal Palace. And reports of a £40m takeover at Charlton proved premature. The deal has not happened and sources close to the would-be investors are not hopeful it will go through. Newcastle has not been sold, and Mike Ashley has now effectively taken it off the market, having found no-one would come near his asking price of £100m. Meanwhile, for lovers of black farce, Portsmouth is a must-read. A much-trumpeted takeover in the summer. The new owner unable to pay something as basic as the players' wages. A sale 42 days later. Now unconfirmed reports of the club going into administration.

Southampton? The only only way Portsmouth's neighbout got taken over was by going into administration. That saga is worth a whole story in itself. To cut it very short, only an idiot would wish that highly dangerous process on Norwich City. The administrator, not a man given to hyperbole, said afterwards that on more than one occasion he gave up hope of saving the club from extinction. And as yet there is no way of knowing if Markus Liebherr will prove a good owner in the long term. He has effectively had to be taken on trust.

And yet Southampton ought to have been an attractive proposition. Yes, there is the 10-point penalty, but otherwise there is a big fanbase and a nice stadium (the cause of much of the trouble, but that’s by the by). Importantly, also, Southampton is a listed company. The share price was suspended at just 9.5p, giving a market capitalisation of only £2.67m. Norwich’s is £16m, but that is based on an unlisted and so nominal share price; a better comparison would be with Watford, another listed company, whose market cap is above £6m. And Southampton’s shares, being traded, unlike those of NCFC, have the potential to rise back to or beyond the 59p they were only two years ago. Providing serious potential for investors, majority and minority. Unless , of course, Liebherr delists the company, which is what Abramovich did with Chelski.

So why did most potential buyers run screaming from the administrator’s office after having a quick guided tour of Southampton's finances? Not because of the headline purchase price, but because they realised "the extent of the proposition", as the administrator euphemistically put it. The liabilities and the cost of running the blessed thing. Which brings us back to where we started with Cullumgate.

MAY 2010

Notts County turned out to be A VERY CAUTIONARY TALE. The Middle Eastern “money” was a desert  mirage, and the supporters who’d saved the club got screwed.

As to Portsmouth, the black farce turned into theatre of the absurd. More owners than QPR had managers, administration, relegation, debts of an eye-watering £134m. And it may still not be over.

Preston, held out by some fans as an example to follow, are now the subject of a winding up order from the Inland Revenue, as now (July 2010) are Sheffield Wednesday. Plymouth, with grandiose plans for a 40,000-seat World Cup stadium on the back of attendances barely a quarter of that, had a season of unpaid debts and a transfer embargo, as promised investment was just that. A promise.

As for all those clubs listed above close to a year ago as being on the market? Still on the market.