Football Clubs Drop In Value

With the recession hitting all of us in some way or other, football clubs are unlikely to be any different. Values of clubs and therefore the shares in them are only likely to go one way at least for the forseeable future and that is down. And most of them are losing money already.

Hereford United is unlikely to buck this trend although it is probably in a better state than many other of the 92 clubs in the top four divisions of English football.

Take Premiership club Middlesborough - it has just posted a loss of £8.3m for the year to December 2007 on a turnover of £48m. Their bank borrowings are £93m and total creditors £132m.

As for selling a club to get out of trouble one only has to look at Newcastle for example. Chairman Mike Ashby bought the club in better times. Recently he's tried to sell it but has now conceded he would lose too much money so has taken it off the market.

The situation at West Ham is also worrying because its Icelandic owner has massive debts. It seems he will have to sell the club to raise cash. Any one looking to buy will know the situation and will not need to pay over the odds.

Keith Harris, a banker with the firm Seymour Pierce, has been telling David Conn of the Guardian how he sees the current situation.

"We're in the toughest economic situation anybody has endured in our lifetime and that means we are unlikely to see much activity on the football takeover scene," said Harris.

"We have been through a time when clubs have been overspending, with very ordinary players commanding huge transfer fees and wages. The climate has changed and takeovers are not going to be the solution to the woes that they may have been two years ago. That is unequivocal.

"The clubs have been spending too much and the club owners were looking for richer people to buy the clubs and take on the losses. But we are in a different climate now, where the football clubs have to realise it is back to the fundamental basics of managing their costs. The supply of richer people has proved to be finite.

"You can't force a club down somebody's throat. They have to really want to buy it. They may expect to make money out of a club ultimately but a football club is a trophy asset, for enjoyment. Confidence is dented everywhere and I do not see much activity on takeovers until we get some form of stability in people's minds."

Back to Hereford United and Graham Turner who owns the largest single shareholding in the club. Should he wish to move on it might prove difficult for him to sell the shares to much advantage in the club certainly in the short-term. With little hope of redevelopment of the ground at present, income stagnating and the possibility of League Two football next season, it looks as Turner and his fellow directors will have to battern down the hatches just like most other football clubs.

At present Turner will probably 'earn' more from his pension with the club than he ever will with his shares. Even though his pension is likely to be worth a lot less currently than it was even six months ago.

---