Debt Free – Is The Badge Enough?

17 Nov

On paper what Stewart Milne has achieved as Chairman of Aberdeen Football Club is miraculous. 
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He took over a club languishing with a debt of both ambition and finance trying to compete with the Big Lads down the road.  Chris Donald the legendary Richard’s son simply had ran out of ideas on how to maintain the club let alone make it a success. He joined the board in1994 becoming Chairman in 1998.
I mention Dick (Richard) Donald as he along with the long forgotten Chris Anderson were instrumental with a certain Sir Alex Ferguson in heralding the most successful period in the Dandy Dons history. The haul of cups in a twenty four thousand all seated stadia was achieved by hard graft and more importantly no debt. That’s right no debt in a All Seated, mostly covered (all but for two corners) bringing in League titles, Scottish Cups and of course a European Cup Winners Cup in 1983. Beating the Galaticos of Real Madrid in Gothenburg with no debt. I would doubt that Dick and Chris even had a overdraft facility at the bank. If it was not for a similar although not quite as successful Dundee United then it would be easy to say this Aberdeen team and club were the last of the old school scottish clubs bringing sucess on a shoestring with nothing more than Savvy, sweat and skill.

The wild days of the late seventies to mid eighties. Before the football revolution of Satelite Television money. When the top league in Europe was Serie A. Heady days indeed.

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Alex Ferguson and Dick Donald in front of benches of the beach end. This would be demolished and replaced by a all seated stand named after the former chairman. http://www.afcheritage.org

Back then life in Aberdeen was simple, play league games, win more than you lose and you know a maximum capacity of twenty four thousand seemed not enough to satisfy the Crowds that regularly filled Union Street as a open top bus paraded a trophy. The supply and demand for tickets to the next big match on the conveyer belt at Pittodrie was such that a loyalty scheme for tickets had to be employed. Go to two out of three selected games get a token at each game. Two out of three tokens enables you to buy a ticket to the big game. Genius from the Donald/Anderson board marginalise the glory hunter and simultaneously increase the home gate to otherwise less desirable games. Did I mention genius because that was exactly what that scheme was. Not only did it reward loyalty it increased revenue. It singularly meant that few fans could complain that they did not deserve a ticket to the glamour games.

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Union Street Open top bus trophy parade (www.bbc.co.uk)

This from a tight well run ship by the sands. No debt and securely ran to budget, with a customer base that was generally happy. All this safe in knowledge that demand for tickets outstripped supply yet ticketless fans did not turn on the club.

The club’s assets in 1984. A team with a minimum of Four Scottish internationals, sometimes suplimented by two or three peripheral in scottish squad. A good splattering of Under 21s in and around the first team and playing staff. Scotland’s first All Seated all covered twenty four thousand capacity stadium situated on prime coastal land including a reasonable sized carpark across Pittrodrie Street and of course no debt. It would not be unusual knowing the way this club was ran then if a profit was not made in more than a few years. A profit to reinvest or save for rainy days and contingencies. A perfectly solid proposition and business model of a Brasso scented football club on it’s way to lifting the League title.

Ten years later the club was in turmoil. Dick Donald had passed as had Chris Anderson and the club was facing a spiraling debt and lack of investment. As other clubs had invested and became winners Aberdeen had not quite invested wisely became nearly men.

The invention of Sky TV and increased monies had exposed Aberdeen’s board as lacking the ready cash to spend. The Taylor report had inforced massive improvements in the stadia and the addition of the Richard Donald Stand had stretched the finiances of the club past breaking even with profits in good years to a club living at the wrong end of it’s newly found overdraft. This added to a fan base that was struggling to come to terms with the lack of success in comparitive terms. There was a sizable chunk of this fan base who expected to win the league every August even though it had been NINE years since the League trophy had left Aberdeen for what could soon be described as it’s perminant home in Glasgow.

A unwilling partner was introduced Stewart Milne. He was almost press ganged onto the board of the Club he had no real links to the club previously had also shown no interest in ever being Mr Aberdeen FC. Almost as if he did not want the poisoned chalis that enhabits the Beach End. A BIG enough section of Dandy Dons where less than welcoming about the Builder from Alford’ inclusion on the board. After four years on the board there was still a chunk of unhappiness when he became chair. The main concern seemed to be ownership of Pittodrie. It is prime land well within reach of the City Centre. The real prospect of Stewart Milne Homes where Fergie won HOME Games worried a lot of Reds. It was not uncommon for Mr Milne to be haranged and harrassed in the street by disgruntled Dons.

Fast forward twenty years. Aberdeen after clever financing by Aberdeen Asset Management, Stewart Milne and cash injection by William and Elaine Donald (WM Donald Builders) Aberdeen sit debt free. The league cup sits proudly in the trophy room a average of sixteen thousand fans fill seventy five percent of Pittodrie. A buzz not seen in thirty years has returned to the reds and sitting atop is Stewart Milne the unwilling and some would say unwanted saviour of Aberdeen football club.

No one could deny him a smug look on his face. He has achieved the very targets he set out twenty years ago. He has stabalised the business brought on field success and the feel good factor back. He has also beautifully extricated himself from the major shareholder position that seemed to sit so uncomfortably within his port folio. Oh and as predicted he owns Pittodrie and associated land which he intends to build flats on.

The plan to move into a lend lease type agreement with Aberdeen City Council and build a stadia to replace Pittodrie. This is the same council who refused planning permission as recently as 2 years ago to the building of a stadia on the southern edge of Aberdeen. So at best you could describe Aberdeen City Council as a unreliable Partner. A worry is regardless of the independant wealth of the shareholders, whenever the shareholding of any business is spread across partners any future investment will usually involves transfer of or dilution of shares and involve agreement across a three sided share holding. Throw in a unstable Political Council (as every Council is by design and nature) and you have a overly complex stakeholder situation.

Effectuvely it has took twenty years for Stewart Milne to get a parcel of land and to pass the problem on.

The problem is this when your business has no collateral(just image rights) you are immediately exposed to liabilties and risk. No one foresaw the Taylor Report because few had predicted the horrible events in the mid eighties at Valley Parade and Hillsbourgh. Even though Pittodrie was “ALL SEATED” millions of pounds HAD to be spent on the stadia to replace benches with seats to bring the stadia up to code. How this was finianced along with the Richard Donald Stand that replaced the Beach End was loans secured on the land at the golf course end of Pittodrie Street.

So everyone is happy Fans have the shiney silverwear and dvds. The business is set fair for a good future. Stewart Milne has his land. Aberdeen Asset Management have shares and the Donalds achieve an ambition of owning their home town club. The Council have a new partner and stake in a stadia. For a one club city it’s a community partnership of cosiness. Lovely everyone is happy. No clouds on this horizon.

Using a public/private model not dissimilar to what is happening at Falkirk and Livingston. The perfect justification for a frachiase style municipal pride with a dirty great big bit of civic infrastructure.

This raises some questions though and they involve being naturally pessimistic. The Community Club model works obviously in the Forth and Almond Valleys but is that really the ambition of one of the top five clubs in Scotland. All due respect to Falkirk and Livingston clubs without the recent history of titles or even 30% of the fans of Aberdeen. Is that really the default ambitions of Aberdeen FC? Surely the Dons are a division above Falkirk etc. Because once you strip the decoration away your left with the exact model of Falkirk. Also if you are relying on any additional investment or safety net funding to be sourced from only two sources (existing board members or finding external investment diluting shares) with little more than a emblem as security then you really are backing yourself into a corner. The unpredictable nature of football club finiance leaves a exposure to unexpected bills and the ilk. Will it be enough for the Dons fans to be “THE BIGGEST COMMUNITY CLUB IN SCOTLAND“? Especially when as most expect the three amigos currently in the Championship make their return to the Premiership and begin to frighten silverwear again.

If you are reliant on fickle fans for income, the variables of prize money, media deals and sponsorship for the maintenance and improvement of your playing staff at the same tims as running a no debt shop you are totally at the mercy of injuries, suspensions, dodgey referee decisions, famine and pestilence. Simply because to RELY on continued success in any sport is inherently dangerous. To trust winning on the field breads sucess off it fails to see the other side of that coin. Losing on the field leads to failure off it.

Of course you set up a selling club ideal like Hamilton Accies once again a punt of many variables. The fact is a not unpredictable bad year for injuries etc in hand with lack of youth players that year is leads to a reduction of income. Any reduced income to balance the books means no investment in youth system or and selling a player or two with no replacement. This annoys fans who vote with their feet and don’t buy tickets. The perfect spiral.

Then you have a reliance on a ever changing Council who at any time can decide or be forced by others to pull out of any comercial deal they have with any partner. A Election and in order to save a school a stadia gets sold. Don’t even think you have to have a lobbiest in the Town House because a vote in Holyrood or Westminster or Strasburg and the House of Cards of a Stadia built on a foundation of sand is washed away.

Dundee United are on their way to debt free as are Hibernian and Heart of Midlothian but these clubs have the safety net the gaurenteed security of owning land the catch all of last resort. A quick look at the old firm where fans have actively protested to ensure that parcels of land (including the stadia) remains within the portfolio of the club. The security of the land is one thing the value of the history and sentiment is another. There is a massive difference in the levels of security between being a Owner/occupier and a tennant! The importance of this was shown at Chester, Wrexham and Portsmouth. More recently Coventry City have had protracted issues simply being able to afford to rent what was designed to be their home.

God forbid similar situation in Scotland. A under funded under pressure local council having to choose between leasing land and facilities to a Football club or selling land (with no real sentimental or historical value) to fund old aged pensioners care.

So Aberdeen Debt free for first time in years? Yes but at a cost of almost every asset.

A partial cause to celebrate? Cautiously, no one has a crystal ball but fail to prepare, prepare to fail.

Because the basic look of this brave new dawn is the Dons
OWE NOTHING
but
OWN NOTHING
more than a badge.

As for the new major shareholders, what exactly have they bought? A business that is little more than a badge? A company with assets? A trading name or a vanity project?

Retaining image rights and a transiant variable playing staff could well be enough in the future but you wouldn’t bank on it.

ALL IMAGES SUBJECT TO OWN COPYRIGHT AS LABELLED

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2 Responses to “Debt Free – Is The Badge Enough?”

  1. S December 10, 2014 at 1:54 pm #

    Not sure your info is correct……Milne / SMG does not own Pittodrie……It still belongs to the club.

    • ronnydavies1972 December 10, 2014 at 2:33 pm #

      Milne owns stake in club but not all. Reading the Statwments regards the Donalds inclusion onto board the Donalds are the major stakeholders now.

      The club has not owned Pittrodrie for a least 2 years now. The restructuring of debt between Stewart Milne and AAM mid 2012 effectively sold the land completely outwith the assets of AFC Ltd. This land including car park was included in Stewart Milnes Portfolio, as chairman and major stakeholder it was easy ti assume that the Club and the Land are in same package. With the addition of The Donalds onto the board and inclusion of new partners like ACC and Aberdeen Uni this seperation of ownership shall become clearer.

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