By Jason McKeown
There was – typically for the Telegraph & Argus – a wholly positive tone to this week’s announcement that Bradford City made a £1.5 million profit for the 2012/13 season. Undoubtedly it is a significant achievement that rightly should be applauded. The club took what David Baldwin described as a “calculated risk” with the budget last season, a risk that was handsomely rewarded.
Indeed it is worth recalling the consequences of what that gamble failing might have been. Baldwin explained that the club committed to a playing budget £600k higher than it could afford, with four variants identified as offering the potential to recoup the deficit if it was required to be made up.
One of those – the selling of the former club shop to the One in a Million charity, who were opening a school – appeared to be in doubt when the Government ruled the school’s opening must be delayed. The other three variants were City going on an unbudgeted for cup run, re-negotiating clauses agreed with clubs who bought some of our youth players and selling members of the current squad. The cup run more than ensured that there was no need to consider the more troubling variants three and four, and eventually the school deal went through – further boosting the coffers.
A great story then and one that the club’s owners can feel rightly proud of. Two summers ago there was talk of leaving Valley Parade and suggestions of big financial problems if the status quo was maintained. Firstly, there was the excellent move to buy the club shop from its landlords Prupim, to halve the £600k+ annual rent that City were forced to pay. This deal was carried out privately by Mark Lawn and the Rhodeses with no little risk to their capital – the successful sale of this land to One in a Million, for a profit, demonstrating excellent business acumen.
Now we can reflect that the calculated risk agreed last season was also a sound decision. Phil Parkinson had the resources to build a promotion-winning squad, the variants identified paid off and the club made a profit beyond their wildest expectations. Just as faith in Julian Rhodes and Mark Lawn was beginning to wane, the pair have demonstrated they have the ability and know-how to take the club forwards.
So all great then? Well, nearly. But not sitting entirely comfortably are the details surrounding the news that Lawn has been paid back the £1 million he loaned to the football club in 2008, details completely ignored by the T&A. Under the terms of the loan agreement, Lawn was been paid annual interest 9% above the Bank of England Base Rate. Since March 2009, Base Rate has remained at the historic low level of 0.5%, which means Lawn was apparently earning a return of 9.5% – or £95,000 – per year.
Four seasons on Lawn has been paid his money back and, according to the T&A, received the interest owed. The exact details cannot be known, but it would appear fair to estimate that Lawn has earned something between £380,000 and £437,000 in interest. This is a tidy profit, which he’d have done well to have made in a different manner, such as investing.
You can, valued reader, form your own judgement over whether this personal profit is agreeable to you or not. Many have argued – accurately – that City would not have found a more favourable interest rate from borrowing this money from elsewhere. Their credit record, on the back of two administrations and regular annual losses, would have made it difficult to raise the capital in the first place – especially as 2008 was the year of the credit crunch and of big name banks requiring tax-payer bailouts. Lawn – who had already invested £1 million 12 months earlier – loaned part of his children’s inheritance when others would not have. So kudos for that.
Yet the issue for me is the belief held that, without the loan, City would not be here today. The money was loaned to the club at the start of the 2008/09 season to fund a gamble on promotion under Stuart McCall, with a £1.9 million playing budget handed to the former City manager. Lawn’s loan was to cover this shortfall, but it was from this point that the club got to a position, two years later, where it was paying players late and talking of ripping out the Valley Parade seats and moving them to Odsal.
Lawn’s loan may indeed have been vital at this time, but the decisions that he and Rhodes made had led us to the point where it was vital. In addition to this capital – £700k of which had been spent before last summer, according to Baldwin – the sell on bonus clause from Fabian Delph moving from Leeds to Aston Villa and George Green’s move to Everton were clearly crucial.
Ultimately, the club’s gamble in 2008 did not work and there was less of a solid plan considered for the consequences of failure, compared to this time around. Lawn’s £1 million loan was a risk on his part – had City gone into administration, he would have been at the back of the queue of creditors – and so it is understandable he sought to ensure he was rewarded for that.
But still, it looks like a big profit…
The point of this article is not to criticise Lawn, or indeed any member of the Board. It’s just that, perhaps, the deserved recent praise for his business acumen is slightly to the detriment of his reputation as being a huge City supporter.
Were me or you in a position of Lawn to loan Bradford City £1 million – bearing in mind your loved ones could lose a chunk of their inheritance if it went wrong – would we be willing to do so and, if so, would we want the type of assurances Lawn agreed? It’s easy to get on the high horse and say we’d want no profit because we love the club, but sadly we will probably never get the chance to find out what we’d really do.
The comparison with Rhodes – somewhat ludicrously rarely celebrated for being a City supporter – and the sacrifices he and his family have made are there to be made. Once the recipient of regular, lucrative dividend payments, Julian re-invested it all and re-mortgaged his home to rescue the club. In contrast Lawn is a richer man for his second £1 million investment at least; and if he was ever to sell his 49% stake in the club he would expect to receive his first £1 million back too.
I have mixed feelings about it, but perhaps overall we should be positive about this development. Lawn has re-established his popularity amongst fans after a successful season, and deserves to share some of the praise for how well things went, due to an improved calculated risk strategy that he helped to implement. When he was less popular, the defence offered by his supporters was that at least he was a City fan – one of us.
If Lawn has made a profit for himself, he has done so whilst delivering a profit for City and taking us forwards. And I like going forwards. And I prefer thinking of Lawn as a successful football club owner than I do thinking of him as unsuccessful one whose failings we overlook just because he is a passionate City supporter.