Friday, November 18, 2011

Charlton Athletic - Into The Valley

It’s debatable which team has made the best start to the season in England, but Charlton Athletic certainly have a good case, as they have gained more points than anybody else (40 after 17 games), suffering only one defeat in the process, and currently sit proudly at the top of League One. Hopes are high that they will manage to achieve promotion, though they will nervously recall their elimination in the League One play-off semi-final a couple of seasons ago, when they narrowly lost on penalties to Swindon Town, thus consigning the Addicks to a longer stay in English football’s third tier.

Under the guidance of former player, Chris Powell, a fans’ favourite, but inexperienced in the managerial role, Charlton have come out of the starting blocks in fine form. The majority of the goals have been scored by the experienced duo of Bradley Wright-Phillips (“he’s better than Shaun”) and club captain Johnnie Jackson, but an influx of new players over the summer has given the club added impetus with notable contributions made by Danny Hollands, Rhoys Wiggins (both from Bournemouth) and Dale Stephens (formerly with Oldham).

However, Charlton fans would be forgiven if they felt that this was a bit of a come down compared to the recent highs of their time in the Premier League, which lasted seven uninterrupted seasons from 2000. Much of the credit for Charlton’s success during this period has to go to Alan Curbishley, who managed the club for 15 years, before leaving the Valley in May 2006 to take a break from football.

"Alan Curbishley - Don't Dream It's Over"

“Curbs” is recognised as Charlton’s second most successful manager, only behind the legendary Jimmy Seed, who led the South London club to two FA Cup finals in the 1940s, winning the trophy in 1947. Arguably, Curbishley’s achievement in the modern era is even more impressive, as he managed to establish Charlton as a solid mid-table side in the highly competitive Premier League on an insignificant budget. Although his team never really challenged for a Champions League place (though they did finish as high as seventh in 2004), by the same token they also comfortably managed to avoid being drawn into relegation battles.

Since those heady days, it’s been a miserable time with the club slumping to two relegations in three seasons, first from the Premier League to the Championship in 2007, then from the Championship to League One in 2009. After such a lengthy period of stability, the board then embarked on a series of ill-conceived managerial appointments, going through three coaches in the second half of 2006 alone.

The highlight of Ian Dowie’s turbulent period in charge was probably the look of astonishment on his face as he was served a writ on behalf of Simon Jordan, his previous employer at Crystal Palace, during the press conference that unveiled him as Charlton’s new head coach. After just two wins in 12 league matches, the board pressed the panic button and replaced the former Northern Ireland international with Les Reed, his assistant, who lasted only a few weeks before being unceremoniously dumped on Christmas Eve in favour of Alan Pardew.

"Bradley Wright-Phillips - Son of a Gun"

Although there was some improvement, Pardew was unable to avoid the drop. As Curbishley said, “No-one has a divine right to stay in the Premier League.” Nor indeed to bounce straight back, as Pardew discovered to his cost the following season. After a poor start to Charlton’s second campaign in the Championship, including eight successive games without a win, the club found itself in the relegation zone and Pardew left “by mutual consent” in November 2008. His replacement was Phil Parkinson, who was somewhat surprisingly appointed as permanent manager despite no discernible improvement in results during his stint as caretaker.

Little wonder that the former chairman, Richard Murray, admitted that the board had made “mistakes particularly in relation to the period following the departure of Alan Curbishley.” He can say that again. To paraphrase Oscar Wilde, “To choose one poor manager may be regarded as a misfortune; to choose four looks like carelessness.”

Not only that, but the club also threw out the cautious strategy that had served them so well in the past, as their ambitions extended to European football. To achieve that aim, they decided to hand the charismatic Dowie an enormous transfer budget, which he proceeded to waste on a selection of incredibly average players, including the likes of Djimi Traoré, Souleymane Diawara, Ben Thatcher, Andy Reid, Madjid Bougherra and Amdy Faye.

In total, the net transfer spend for the 2006/07 season amounted to an incredible £19m, according to the respected Transfermarkt website, which was more than the previous five seasons combined. Further funds were splurged on expensive loan deals for an unfit Jimmy Floyd Hasselbaink and a very raw Alex Song. As Murray put it with commendable under-statement, “The simple truth is that vast sums of money were spent on players who have proved not to be successful.”

"Johnnie Jackson - Put Your Hands Up For Charlton"

To a certain extent, the board’s decision to take a few more risks was understandable, especially with a lucrative new Premier League television deal on the horizon, but it felt like a case of throwing the baby out with the bath water. To put it bluntly, Charlton got ahead of themselves, as outlined by the former Charlton midfielder Danny Murphy, “People were actually moaning at the time that we ‘only’ finished in mid-table. It’s only now that people realise how much of an achievement that was.”

To coin a phrase, be careful what you wish for. The ensuing relegation resulted in “financial turmoil” according to Murray, as there was a significant reduction in TV income, gate receipts and sponsorship deals. The problem was that Charlton had built up a Premier League infrastructure and wage bill that could not be supported on the revenue from lower leagues. As Murray explained, “In many respects, the longer a club remains in the Premier League, the more its cost base increases and relegation – even with the two-year parachute payments – still makes life difficult.”

In Charlton’s case, this meant severe financial difficulties with the club reporting a series of large losses and debts spiraling out of control. This was an all too familiar story to older fans, as the club had come very close to going out of business in 1984 after similar reckless spending, including the astonishing signing of former European Footballer of the Year Allan Simonsen from Barcelona.

"Dale Stephens - Smile Like You Mean It"

Returning to more modern times, it had become clear that Charlton required substantial funds to move forward, hence the board’s frantic search for new investors. Many names have been in the frame, including two owners who subsequently opted for other London clubs, namely Tony Fernandes (QPR) and David Sullivan (West Ham). The former Leeds United and Cardiff City chairman Peter Ridsdale was also linked, but fortunately this did not come to pass, as Charlton had already suffered enough from trying to “live the dream.”

More credibly, a bid from Swiss-based fund manager Sebastien Sainsbury was reportedly rejected, while the Dubai-based Zabeel Investments got as far as tabling an indicative cash offer of around £50 million before pulling out of negotiations in October 2008, largely due to the downturn in the global economy.

Matters came to a head in the summer of 2010, when the existing companies were wound up after an Extraordinary General Meeting, which left Richard Murray in control of a new holding company, Baton 2010 Limited. For those interested in corporate actions, this replaced CA 2010 plc (formerly Charlton Athletic plc), which was the owner of the football club, Charlton Athletic Football Company Limited.

Nevertheless, the directors still had to put £5 million into the club to avoid administration, which might sound overly dramatic, but Murray emphasised the importance of this money, “This has been a critical time for the club. Our future was uncertain and financially this was potentially one of our darkest hours.”

"Why does it always rain on me?"

Murray had effectively bought enough time to find new investors, which he managed to do four months later, when a consortium represented by popular former chief executive Peter Varney bought a controlling interest (90%) in Baton 2010 Limited via its acquisition vehicle CAFC Holdings Limited (incorporated in the offshore tax haven of the British Virgin Islands), leaving Richard Murray with a 10% stake.

The key players in the new ownership are new chairman Michael Slater, described as “a lawyer and businessman” on the club’s website, and Tony Jimenez, the ubiquitous “international property developer”, who respectively own 23% and 28% of CAFC Holdings Limited. Some concerns have been expressed about the latter’s involvement, partly based on his brief time as vice-president (player recruitment) at Newcastle United, when he clashed with then manager Kevin Keegan, and partly due to his checkered record as a director (16 of 17 companies dissolved, according to the Guardian).

However, the new men have been welcomed with open arms by the old hands at Charlton. Murray said, “I now believe I am passing the club to the right people who can secure its long-term future.” Varney added, “Charlton’s finances are not in a good state and the fans can rest assured that this is in the best interests of the club.” In addition, some continuity is ensured by the presence of both Murray and Varney on the new board.

There remain some doubts among fans, especially after the new owners rapidly back-tracked on a promise to support manager Phil Parkinson. On their arrival, Slater said, “It's certainly not our intention to make any change. Phil's done a great job. We're third in the league and that speaks for itself, so we're going to have a sit down with Phil over the next few days and we'll give him every support.”

"Michael Slater & Tony Jimenez - Welcome Interstate Managers"

Less than a week later, Parkinson was shown the door, with Slater explaining, “Clearly, improvement is needed on the field. The team has not won in the league since November and recent performances have simply not been good enough. Last night's defeat convinced us as a board that change is required now.” Of course, this move could also be construed as decisive action, though it did not actually produce the desired end result of promotion to the Championship, even if a play-off place was secured.

So what will Charlton’s strategy be going forward?

Slater has outlined a much-needed down-to-earth approach, “Our plan is to run the club on a sensible financial footing and develop a commercial plan to ensure we make progress on and off the pitch to meet the expectation of the fans. What we won’t do is create unrealistic, pie-in-the-sky expectations.” Having said that, it is clear that to achieve a sustainable model, Charlton need to gain promotion. Therefore, Slater has added, “Nobody can guarantee success, but we did not come to Charlton to run it as a League One club. It is not a viable business in this division.”

This can be seen by the rising debt levels, which nearly pushed the club over the edge. Back in 2005, Charlton actually enjoyed net funds of £4 million before that calamitous 2006/07 season drove debt up to £23 million. The last published accounts for the holding company are from 2009, when the debt was £24 million, but we can make a pretty good estimate of what the debt levels were in 2010, based on the debt reported by the football club and the notes in their accounts, which suggest that debt reached £34 million – “significant” according to Slater.

This comprised £14.6 million of corporate convertible bonds, £7 million of director loans (of which £5.3 million was added in 2010), £6.8 million of bank loans, a £5.3 million overdraft and a £0.3 million loan from the Football League.

As part of the company restructuring in August 2010, a number of steps were taken to reduce this debt burden. The bonds were converted into shares in CA 2010 plc, while the directors’ loans have been designated as interest-free unless the club is promoted and only repayable over a five-year period in the event of promotion to the Premier League. In addition, the bank loans have been renegotiated to delay the repayment dates (mainly from 2013 to 2015), though the quid pro quo is a higher interest rate: £2.5 million at 7.2%, £3.2 million at LIBOR + 2.5% and £1 million at LIBOR + 3%.

The growing debts are a natural result of the club’s unsustainable business model, which has produced a series of hefty losses since 2006, adding up to around £44 million in the last five years. In fairness, the losses have been getting smaller since the £11.5m registered in the annus horribilis of 2008, with £8 million reported in 2009 and £6.6 million in 2010, the improvement partly due to a £3 million reduction in interest payable.

As the revenue has fallen due to Charlton’s fall down the divisions, Charlton have made strenuous efforts to slash their costs in line with their new status and vastly reduced revenue. In 2007, their total expenses were £56 million, but they managed to cut this to £20 million in 2010, a reduction of 64%. This was essential as revenue fell by 74% in the same period from £36 million to just £9 million. Of course, the problem is that this reduced investment has been reflected in poor performances on the pitch.

The more astute among you will have noticed the other problem, which is that the revenue has always been insufficient to cover costs. Even if non-cash expenses such as depreciation and amortisation are excluded, the EBITDA (Earnings Before Interest, Taxation, Depreciation and Amortisation) is solidly negative, e.g. a £9 million loss in 2010.

"Meet Danny Hollands"

Losses have been compensated to some extent by profit on player sales, though the last substantial sale was Darren Bent to Tottenham in 2007. Without that £11 million profit, the 2007 loss would have been even larger than 2008 at £21 million, which is awful on a turnover of £36 million. In fact, the last time that Charlton made a big profit (£11 million) was in 2004, which was almost entirely due to the sale of Scott Parker to Chelsea.

Even the £1.4 million profit in 2005 would have been a loss without an exceptional £2.8 million insurance payment for injured players. The harsh reality is that Charlton have been living above their means for some time, so something had to give.

As a technical aside, it should be noted that the profit and loss account figures have been taken from the holding company, Charlton Athletic plc, for the years between 2005 and 2009, but this was not possible for 2010, as no accounts were issued. Instead, I have taken figures from the football club, Charlton Athletic Football Company Limited, for 2010. Looking at these two companies’ financial results in previous years indicates that any differences are immaterial, so this should be a reasonably safe approach.

What is indisputable is the catastrophic effect that the two relegations have had on Charlton’s revenue. In fact, it already started falling in the Premier League in 2007, as the club received a smaller merit reward for the lower final league position. Parachute payments over the next two seasons were not enough to prevent revenues falling by more than a third from £36 million to £24 million. However, the real damage was inflicted in 2010 by the double whammy of dropping into League One coinciding with the end of the parachute payments, so revenue plummeted to £9 million, which represents a fall of nearly 80% from the £42 million generated in 2006.

All three revenue streams have been adversely affected. Since 2006, match day income fell from £13 million to £6 million and commercial income from £7 million to £2 million, but it is television where the impact has been most significant, falling by an incredible 95% from £22 million to £1 million.

Television money in League One is mainly sourced from the Football League central distribution of £640,000 that is made to all clubs plus a solidarity payment of £108,000 from the Premier League. Both of these were scheduled to increase in 2010/11 to £656,000 and £335,000 respectively.

Obviously, there is never a good time for a football club to be relegated, but it is fair to say that Charlton’s timing was particularly bad, as they missed out on the significant growth in TV deals. As an example, they received £18 million for coming 19th in their last season in the Premier League in 2007, but Blackpool got £39 million for finishing in the same position last season. Similarly, while Charlton’s relegation was cushioned by £23 million of parachute payments, Blackpool will receive £48 million (£16 million in each of the first two years, and £8 million in each of years three and four).

This huge increase was criticised by Charlton’s former chief executive, Steve Waggott, “This will create a worrying divide for clubs in the lower leagues. Some chairmen believe the proposal has shifted the inequality in the English game further down the divisions, while others feel this has created a Premier League 2 in all but name.”

Although the real TV riches remain in the Premier League, it would still be very worthwhile for Charlton to win promotion to the Championship, as the new deal in that division is worth £4.7 million (£2.5 million central distribution plus £2.2 million solidarity payment), which is much higher than League One’s £1 million.

However, there is a cloud on the horizon in the shape of the new Football League three-year TV deal from 2012/13, which has been reduced by 26% or £23 million a season, reflecting what Football League chairman Greg Clarke called, “a challenging climate in which to negotiate television rights.” As there was no interest from BBC, ITV or even ESPN, the only serious contender was Sky, who could thus secure the package with a much lower bid.

Despite that change, television money is still the great divider between leagues. As a comparison in 2009/10, if we compare Charlton’s revenue against typical clubs in the higher leagues, e.g. Nottingham Forest in the Championship and Blackburn Rovers in the Premier League, we can very clearly see that factor at play with substantial differences between the TV revenue: Charlton £1.2 million, Forest £4.3 million and Blackburn £42.6 million. The other revenue streams are not too dissimilar. In fact, Charlton’s match day income of £5.8 million is only slightly lower than Blackburn’s £6.2 million.

The lack of a level playing field was noted by Charlton’s former chairman, Derek Chappell, after relegation to the Championship in 2008, “This demonstrates starkly the gulf between the Premier League and the Championship in financial terms due to the different levels of broadcast income.” More prosaically, the last annual report observed that the “divisional status” was the club’s principal risk, as this “has a significant impact on the level of revenue streams generated by the company and its ability to trade profitably.”

This has also been felt in match day income, partly due to attendances falling from over 26,000 in the Premier League to an average of 15,600 in League One last season and partly due to reductions in ticket prices. Even so, according to a survey this summer by the BBC, Charlton are the fifth most expensive team to watch in League One, only surpassed by Leyton Orient, Brentford, Hartlepool and Huddersfield.

In order to attract fans to The Valley, the club has employed some innovative, imaginative marketing methods, most notably the Valley Express coach service, which offers fans around Kent return transport to the stadium. When it became clear that Charlton were going to be relegated from the Premier League, the club made an offer of a free season ticket for the 2008/09 season to all season ticket holders who renewed before the end of April 2007 if Charlton gained immediate promotion back to the Premier League. More recently, their offer of “football for a fiver”, when tickets to the match against Exeter in February 2011 were priced at £5, attracted a bumper crowd of nearly 25,000.

Such initiatives have helped maintain Charlton’s crowd as one of the highest in League One. In fact, their 2010/11 average was the third best in League One, only behind Southampton and Sheffield Wednesday, and actually above 10 clubs in the Championship, including promoted Swansea City – and local rivals Crystal Palace.

The Valley is one of Charlton’s top assets, as the stadium has been extensively modernised at the cost of around £37 million and now boasts a capacity of just over 27,000. The club also has planning permission form Greenwich Council to extend the capacity to 31,000 and potentially even 40,000 if the club ever returned to the promised land of the Premier League.

Much of the work was done between 1985 and 1992, after the club was forced to leave The Valley, due to a combination of safety factors and a dispute with a former landlord over car parking. Charlton had to ground-share, first with Crystal Palace and then West Ham, before finally returning to The Valley in December 1992.

"Rolls Rhoys Wiggins"

However, although it’s great to be back home, The Valley is somewhat of a double-edged sword these days, as the costs of running such a large stadium are much higher than those incurred at other League One clubs, who tend to have much smaller grounds. It’s the same story for the splendid 37-acre training facilities in New Eltham.

As might be expected, due to the reduced exposure offered by the lower leagues, Charlton’s commercial income has also fallen away from £7 million in the Premier League to £2 million in League One. This trend was exacerbated by their shirt sponsor Llanera, a Spanish property group, going bust halfway through a 4½-year deal worth £6.6 million. Charlton have had little luck with their shirt sponsors, as All:Sports also went into administration in 2005.

The current shirt sponsors are Kent Reliance Building Society (KRBS), who signed a three-year deal starting in the 2009/10 season. The figures were not divulged beyond a “significant six-figure” annual sum, but the deal is said to be one of the largest in League One, comparing very favourably with many teams in the Championship. After many years with Joma, the kit supplier was changed to Macron last season in a four-year deal described as “the biggest kit contract in the club’s history.”

Charlton’s wage bill reflects what they have strived to do in the face of diminishing revenue, namely to implement a programme to cut costs. Since the peak in 2006, revenue has decreased by 78% (or £33 million) and the wages have more or less fallen in line by 70%, though the absolute reduction is “only” £24 million. This has produced a deeply concerning wages to turnover ratio of 112%, now that there are no more parachute payments. To place that into context, big spending Manchester City’s ratio last season was 107%.

Actually, this has always been an issue for Charlton, and this important ratio even looked unimpressive in the last two seasons in the Premier League: 82% in 2005/06 and 95% in 2006/07. Recent years have also included what the club described as “significant” pay-offs to departing players and managers, e.g. Alan Pardew reportedly received a seven-figure sum. Hence, the need for the club to offload high-earning players and make many back office staff redundant.

The trend in player amortisation, namely the annual cost of writing down the cost of buying new players, also reflects the club’s changing circumstances, as this has decreased from £6.5 million in 2007 (the last season in the Premier League) to a negligible £1.2 million in 2010.

Indeed, if we look at Charlton’s transfer activity over the last 12 seasons, it is clear that Charlton has become a selling club, largely out of necessity. In the seven years up to 2007, the club had net spend of £54 million, while in the last five years the pendulum has swung and Charlton have generated net proceeds of £37 million from the transfer market. Admittedly, most of that came in the year immediately following relegation from the Premier League, when they sold Bent, Reid, Diawara and Luke Young.

However, it is likely that any young talents developed by the club will leave sooner rather than later, unless Charlton secure promotion to a higher tier, as was seen by the sale of youth internationals Jonjo Shelvey to Liverpool for an initial £1.7 million and Carl Jenkinson to Arsenal for £1 million. That said, since the takeover there have been signs that the new owners will be more willing to loosen the purse strings in a bid to get promoted, as explained by chairman Michael Slater, “The board knows what you know – that the only way out of League One is to invest in the playing squad.”

"Jonjo Shelvey - Don't Look Back in Anger"

The players actually represent a “hidden” asset on the balance sheet, as their net book value in the accounts was only £339,000 as at June 2010, while the value in the real world is considerably higher – £9.5 million according to Transfermarkt. Overall, the club has net assets, which were reported as £2.6 million in the last available accounts for the holding company (June 2009). This included £35 million for land and buildings, primarily covering The Valley.

The 2010 accounts for the football club also note possible additional net transfer fees receivable of £4.1 million, though this is far from certain, as it depends on achievements made by some of the players sold by Charlton, including the number of appearances, trophies won and international caps.

Nevertheless, the cash flow statement demonstrates how important the directors’ support and commitment has been to the club. Every year since 2006 the cash flow from operating activities has been negative and only improves if the club sells players. Incidentally, the relatively high cash inflow from player sales in 2008 is largely due to Darren Bent’s transfer, even though that took place in 2007, as the cash was only received in the 2007/08 accounting year. Actually, payments for a transfer of that magnitude are normally made in installments, so cash from a major player sale is rarely available immediately.

The directors’ support has been crucial in keeping Charlton going on several occasions, such as the £5.5 million share issue in 2005 to “support investment in the first team squad”, the £5 million loans made in 2007 and the £14.6 million convertible corporate bond issue in 2008 that allowed the club to repay short-term bank loans and provided it with working capital. Since then, the directors have provided a further £7 million in loans. Interest payments on the loans and the bonds have been suspended, even though they have been booked in the profit and loss account. In addition, Richard Murray provided £3 million of funding for working capital in August 2010.

In short, it is unlikely that the club could have survived without these regular injections of cash from the directors.

So what does the future hold for Charlton Athletic?

Given the new owners’ track record to date, the chances are that they will continue to follow a prudent strategy, though if Charlton are still among the League One leaders around Christmas, it would not be that great a surprise if the board splashed some cash in the January transfer window in order to improve their chances of getting over the finishing line. They would desperately want to avoid a repeat of their play-off heartache by securing an automatic promotion spot, as this club really needs to be in the Championship.

"Matt Taylor - Heads Held High"

That said, the club has to be conscious of the new scheme to be introduced in the Football League from the 2012/13 season that is designed to lower spending on wages. This is a version of UEFA’s Financial Fair Play regulations called the Salary Costs Management Protocol (SCMP) that already operates in League Two, where clubs are only allowed to spend 60% of their turnover on wages. This will be reduced to 55% and also apply to League One. Championship clubs will not be allowed to spend more than they earn.

Charlton are well aware of the future restrictions, as confirmed by chief executive Stephen Kavanagh, “In signing 16 players this summer, we’ve had to take wage capping into account.” Even though they have savagely cut their payroll, Charlton would still have to halve their 2009/10 wage bill of £10.2 million to be in line with the proposed rules, which would be a major challenge. Promotion would be a far better alternative, though there are obviously a few other clubs that will have say in that particular discussion.

Equally important to Charlton’s prospects will be their academy, which has been praised by a number of knowledgeable observers. Even though it is difficult to compete with the larger London clubs, Charlton can offer their youngsters a Premier League standard training ground and an opportunity to play with many of their academy graduates going on to feature in the first team, such as Chris Solly and Scott Wagstaff. On their heels, there are England U17 internationals Jordan Cousins and Diego Poyet, son of Gus, the former Spurs and Chelsea player.

"Big Ben Hamer"

Michael Slater confirmed the focus on youth, “I can’t stress enough the importance of our investment in scouting and the academy – it’s essential for the club’s success in the medium to long term.” His views were echoed by Stephen Kavanagh, “We cannot ignore the fact that investing in the academy provides a long-term financial benefit for the club.”

Whether the revised compensation scheme under the new Elite Player Performance Plan (EPPP) will damage this strategy, only time will tell, but it does appear that the days of a young star moving for large sums might be coming to an end. However, Kavanagh is confident that Charlton “can make the most of the new system.” Although it would have meant receiving less money from Sean McGinty’s move to Manchester United two years ago, he pointed out that he Premier League had also agreed to increase its grant for Football League clubs' youth set-ups by around £300,000 per year.

He added, "With no guarantees that any club will produce a player talented enough to be wanted by the bigger clubs, this is a significant sum, because clubs are effectively being paid run to their academies, whether they produce players to be sold on or not.” In other words, a bird in the hand might be worth two in the bush.

"Michael Morrison - Pressure Point"

In many ways, Charlton’s decline is a cautionary tale to those in the Premier League. Even though they were considered to be a well-run club, one season of madness set them on a vicious downward spiral, as they struggled to cope with the effects of relegation.

However, this is club with considerable potential, otherwise it would not have attracted new investors at a time when so many other clubs are effectively in the shop window. Not only do they have a good stadium and training ground, but they also have a sizeable fan base and a large catchment area. Furthermore, the government is funding considerable regeneration in their neighbourhood, including building many new homes and improving travel infrastructure.

After a hideous few years, Charlton fans may once again allow themselves to look to the future with a degree of optimism. That’s certainly Michael Slater’s view, “It wasn’t so many years ago that this club was a regular in the Premier League. There’s no reason why that can’t happen (again) in the near future.”

Wednesday, November 2, 2011

Derby County's American Dream

In the notoriously competitive Championship it is perhaps unsurprising that so many clubs lose patience with their managers in their eagerness, almost desperation, to reach the promised land of the Premier League. Indeed, four have already exited stage left this season, including two former England managers in the form of Sven Göran Eriksson and Steve McClaren. So, when Derby County’s board extended Nigel Clough’s contract until 2015, it somehow seemed more extraordinary than the customary news of another manager’s sacking.

Admittedly the Rams made an excellent start to the season, winning their first four games, despite an absence of star names in their squad, so it should probably not be classified as a major shock. Even though Derby found the going more difficult in October, they still sit in the play-off positions with nearly a third of the campaign gone, so promotion remains a possibility, albeit very far from a fait accompli.

When Clough arrived at Derby in January 2009, he spoke of a 10-year plan and reinforced this approach when he signed the new contract, “From day one we knew this was going to be a long-term project and it is still very much a work in progress.” He has received solid backing from the club’s owners, notwithstanding the indifferent results in the last three seasons, when Derby have finished 18th, 14th and 19th respectively.

Indeed, Derby fans will hope to avoid a repetition of last season, when a promising start in which they briefly looked like realistic promotion contenders merely foreshadowed an awful run of two wins in 18 games which turned them into relegation candidates.

"Steve Davies - Going Up?"

The Rams’ support has become accustomed to having their hopes dashed in recent years, as the thrilling victory in the Championship play-off final against West Bromwich Albion in 2007 only paved the way for a nightmare time in the Premier League, when the team collected a paltry 11 points, winning just once and finishing rock bottom.

Even Billy Davies, the manager who guided Derby to promotion, admitted that the club had been promoted at least a season too early, as he left “by mutual consent” in November. His successor, Paul Jewell, fared little better, lasting only a year before he resigned in December 2008. Clough thus became the ninth Derby manager since 2001, so it is understandable that the board would seek a period of stability at the helm.

While performances on the pitch have not exactly set the world on fire, it should be acknowledged that the board has at least improved the state of the club’s finances, slashing the wage bill, though this has been at the expense of weakening the squad, notably when two reliable goalscorers were sold: experienced striker Rob Hulse to rivals QPR in August 2010 and Scottish international Kris Commons to Celtic in January 2011.

"Theo Robinson - Hand in Glove"

This has caused some fans to call for more investment with a few protests against the board’s parsimony. Nigel Clough was moved to observe, “I think we need about half a dozen good, established Championship players to take us forward.” There have been many new arrivals this summer, including a trio of loan deals that were made permanent: England U21 goalkeeper Frank Fielding from Blackburn Rovers and two forwards, Theo Robinson from Millwall and Jamie Ward from Sheffield United.

However, many of the signings left the fans distinctly under-whelmed, even though players like Jason Shackell (from Barnsley) and Craig Bryson (from Kilmarnock) figured prominently in Derby’s promising start to the season. There’s little doubt that it is difficult to secure promotion without the necessary investment, but on the other hand it is by no means impossible, as evidenced by both Norwich City and Swansea City going up last season on a shoestring budget.

Older supporters will remember a glorious period in the early 70s, when the legendary Brian Clough (Nigel’s father) and Peter Taylor led the Rams to their first ever League Championship in 1972 with a team featuring the prolific Kevin Hector and the commanding Roy McFarland. They reached the semi-finals of the European Cup before being controversially eliminated by Juventus.

"Glory Days"

Clough and Taylor left the club following a disagreement with the directors, but former player Dave Mackay repeated their feat by winning the title in 1975, boosted by the signings of Francis Lee and Bruce Rioch. Again, they (briefly) shone in Europe, including a memorable 4-1 demolition of Real Madrid that included a hat-trick from the darling of the terraces, Charlie George.

Since then, it is the boardroom battles that have dominated coverage of Derby County, as there have been frequent financial problems, spiced up with an embarrassing legal case. They were once owned by the notorious “bouncing Czech” himself, Robert Maxwell, who sold the club to Lionel Pickering, a local newspaper businessman, in 1991 after relegation from the old First Division and shortly before his demise, which was officially described as “death by accidental drowning.”

There followed a period of relatively high investment in new players, culminating in promotion to the Premiership in 1996. Pickering anticipated the trend of clubs building brand new stadiums by moving to Pride Park in 1997 and for a while the club flourished in the top tier. However, relegation in 2002 proved to be disastrous to the club’s finances, as key players such as Malcolm Christie, Chris Riggott and Danny Higginbotham had to be sold. This did not prevent the club’s principal debtor, the Co-Operative Bank, from putting it into receivership in October 2003.

The club was then rapidly sold for the princely sum of £3 to the mysterious ABC Corporation, based in Panama, who provided a loan of £15 million, albeit at an exorbitant rate of interest of 10% a year. At the time, former chairman John Sleightholme described them as “a mixture of persons, at home and abroad, who have asked to remain anonymous.”

"Pride Park (In the Name of Love)"

The ownership trio was finally revealed to be Sleightholme, Jeremy Keith (subsequently appointed chief executive) and Steve Harding. Dubbed “The Three Amigos” by the local press, this was very much a case of “out of the frying pan, into the fire” and they were met with a storm of protest by two separate supporters groups, the Rams Trust and the Rams Protest Group, who did not fully trust their motives – with much justification. In April 2006, they eventually succumbed to the pressure and sold the club to a group of local businessmen, led by Peter Gadsby, and (perhaps inevitably) known as “The League of Gentlemen”.

Years later, the fans were shown to be right, as Keith was jailed, along with co-conspirators, Andrew Mackenzie, the finance director, and Murdo Mackay, the director of football, in a squalid tale of false accounting and conspiracy to defraud. Each of them had claimed £125,000 in commission for their “services” in helping to secure a loan for the club, but these payments were never approved by the board.

At that stage the bank loans and money owed to the ABC Corporation had reached a worrying £50 million, but Gadsby’s consortium brought the debt down to more manageable levels. Eighteen months later in October 2007, Gadsby stepped down as chairman and was replaced by former Hull City owner, Adam Pearson, who was identified as the man who could bring in overseas investment to take Derby to the next level.

"Fielding - Our Frank"

In spite of the calamitous results in the Premier League, Pearson quickly succeeded in finding new investors in the shape of General Sports and Entertainment (GSE), who bought 93% of the club via the parent company Gellaw 101 Limited in January 2008. Pearson continued to act as chairman and retained his 7% stake until October 2009, when he left the club to pursue “new challenges.”

On their website, GSE modestly describe themselves as “the only company with the breadth and depth of experience, knowledge and contacts to truly maximise the power of sports and entertainment”, though their record before acquiring Derby County was rather thin, largely consisting of a successful turnaround story at the Fort Wayne Wizards, a Minor League baseball team in Indiana that they bought in 1999 and sold in 2006.

Again, there was an issue over the identity of the owners, as incoming chairman Andy Appleby said, “GSE will be managing the investment of members of the USA consortium they have brought together” without revealing exactly who those members were. The key players on the Derby County board are Appleby himself and the chief executive Tom Glick. Both of these have sports experience in the NBA: Appleby as a Senior Vice President at the Detroit Pistons; Glick as Chief Marketing Officer at the New Jersey Nets.

In fairness, this American takeover was funded by cash, as opposed to increasing borrowing, so is more akin to Randy Lerner’s acquisition of Aston Villa than the Glazers’ purchase of Manchester United. As Pearson said, “the key thing is that the money coming to Derby is not repayable.” The deal was described as being worth £50 million, but only around £16 million of that actually went to the previous directors with the rest being used to take on the club’s existing debts.

"Glick - Tommy Gun"

Given Derby’s troubled background with new directors, it was entirely understandable that the fans were cautious in their welcome. Once bitten, twice shy. Nevertheless, Nigel Clough has tried to reassure supporters, “There was a lot of scepticism, people saying they are only here for the short-term. But all that has gone – what they’ve done is what they’ve said they’re going to do. They’ve put money into the club and all the off-field activities have been spot on.”

It is easy to see what the football club has got from the deal, but what inspired GSE to invest their money in Derby County? Appleby has spoken of the club’s tremendous potential, great support and excellent stadium, which is fair enough, but eyebrows were raised when GSE’s stated that their aim was “to establish the Rams as a global brand and a Premier League force of the future.”

While applauding the ambition, the immediate reaction is that this objective is not only a tad unrealistic, but is also the wrong way round, as it would be better to get to the Premier League before trying to establish a global presence. Even Appleby admitted, “It will be less easy in the Championship.” It is true that “the entire world watches English football”, as Appleby put it, but that level of global exposure is only offered by the Premier League.

In fact, there have been a few contradictions in GSE’s approach. One moment, they unassumingly talk of producing incremental improvements from their “knowledge of best practices in management, marketing and selling.” The next moment, they’re shouting the odds, “Our goal is to become the best-run football club in the world. I’m not sure Derby could be a Manchester United, but it could certainly be in the top six or seven of the Premier League.”

"Jason Shackell - Eyes Down"

Similarly, when they arrived at Derby, they were highly complimentary about the incumbent leadership, “We respect the manager (Paul Jewell) and Adam Pearson. They’ve forgotten more about English football than we know.” Of course, both of these respected gentlemen have now gone.

GSE are on far safer ground with their financial strategy. Buoyed by the parachute payments received after relegation from the Premier League, they have lived up to their promises to reduce liabilities and the wage bill, though the jury is still out on whether they have built a squad good enough to achieve promotion.

They have emphasised that they have “a sensible and sustainable plan” to take the club back to the Premier League. Appleby said, “We will provide the resources necessary to be successful, (but) we don’t want to spend money foolishly.” The 2009 annual report put this another way, saying that the club would “operate within its means” and “not wildly speculate with the future.”

To be fair, this does not automatically sound the death knell for Derby’s promotion hopes. As chief executive Tom Glick explained, “It has been proven time and time again… that you can run a responsible club and you can also be in the play-offs and achieve promotion.”

The reality is that without substantial investment from GSE, Derby County would struggle to find any more money to spend on new players, as they rarely make profits. In the last six years, the club has only reported a profit twice, on both occasions due to special circumstances. In 2006 the £51,000 profit was entirely due to a £7 million exceptional item due to a loan restructuring. As the accounts said, “No-one should be under any illusion that the business was losing in the region of £7 million a year.” Similarly, the £1.8 million profit in 2008 was driven by the much higher television revenue in the Premier League.

That said, the £2.2 million loss in 2010 represents steady progress compared to the £14.9 million loss reported the previous year. Revenue actually slightly declined by £1.5 million, so almost all of the improvement came from player costs, as the wage bill was cut by £5.7 million and player amortisation was reduced by £4.4 million.

However, offloading players from the wage bill has come at a price, as Derby have consistently made losses on player sales (£4.5 million in the last three years) and have had to impair (write-down) player values. On the other hand, the progress the board has made in reducing debt is reflected in the reduction in annual interest payments from £3.8 million in 2005 to £0.7 million in 2010.

"Kilbane - We need to talk about Kevin"

The club’s losses are covered each year by additional investment from the owners, but they have also been effectively subsidised in the past two years by the Premier League parachute payments: £11.8 million in 2009 and £12.4 million in 2010. These have now come to an end, so Derby will have to cover this hole somehow from 2011 onwards. Although there is some scope to raise revenue, this essentially means a further reduction in wages.

Like all football clubs, Derby’s operating profit is influenced by non-cash items such as depreciation and amortisation. In fact, in 2010 they were actually cash profitable, as their EBITDA (Earnings Before Interest Taxation Depreciation and Amortisation) was a reasonable £4.9 million, but this is unlikely to be the case in 2011, due to the loss of the parachute payments.

However, as Liverpool’s owner, John W Henry, said, “I don’t think you go into sport to make a profit.” That’s certainly the case in the Championship, where the vast majority of clubs make losses with only four reporting a profit before tax in 2009/10 and one of those, Burnley, had the benefit of Premier League money. The total losses in the Championship worsened for the sixth consecutive year to a record of around £130 million, while the total net debt rose to £875 million.

In fact, Derby’s loss of £2.2 million was one of the better financial results with six clubs reporting losses above £10 million, the worst being Sheffield United at £18.8 million. As the 2009 accounts stated, “In comparison to the club’s peers in the Championship, the club is in a very healthy state.” Tom Glick went further, “If other clubs decide to lose tens of millions of pounds, that is up to them, but what we are committed to doing is building a stable club that can consistently perform at a high level.”

By the way, the size of the loss appears to have little bearing on a team’s chances of success, as the three promoted clubs in 2011 represented all points on the spectrum: QPR made a large loss, but Norwich City only had a small loss, while Swansea City were actually profitable.

As we have seen, Derby were one of the Championship clubs that benefited from parachute payments, which helped them to their sixth place in the revenue “league table” for 2009/10. As might be expected, the three clubs that were in the Premier League the previous season (Portsmouth, Hull City and Burnley) had the highest revenue (between £45 and £60 million), while the next three teams (Middlesbrough, Reading and Derby County) still had the benefit of parachute payments.

That significant financial advantage was lost last year, though Football League chairman Greg Clarke has argued that the effect is not necessarily so important, “Largely the parachute payments are absorbed by the club paying their debt and players. Last year three clubs came down and did not make the play-offs.” This is true, but the previous season was a different story with Newcastle and West Brom returning to the Premier League at the first attempt.

Given Derby’s lowly position in the Championship, it could be argued that they have under-performed recently, especially in 2008/09 and 2009/10. However, this might be a little misleading, as Paul Jewell famously said that the previous regime had already spent the first year’s parachute payments before relegation.

Nevertheless, even excluding parachute payments, Derby would have had higher revenue than all three promoted teams, almost twice as much in the case of Swansea City. In other words, a well-managed and organised team can still succeed in the face of financial disparity.

Revenue over the last three years has been distorted because of one season in the Premier League, which produced a record high of £49 million in 2008, followed by the parachute payments impact. Excluding this factor in 2010 would reduce total revenue from £29.8 million to £17.4 million and make TV the smallest revenue category at £3.6 million, behind commercial income of £7.5 million and match receipts of £6.3 million.

However, it should be noted that both of these revenue streams actually fell in 2010, particularly match receipts by £1.9 million (24%), which was “mainly a reflection of the success the club had in the previous season’s domestic cup competitions.” Although the big boys tend to not take the FA Cup and Carling Cup seriously, they can represent important money-spinners for others not so fortunate.

Television money in the Championship is mainly sourced from the Football League central distribution of £2.5 million that is made to all clubs, which was increased last season, plus a £1 million solidarity payment from the Premier League.

In 2010/11, Derby’s parachute payment disappeared, but the Championship payments increased to around £5.2 million, as the solidarity payment increased £1.2 million up to £2.2 million and each Championship club was given an additional £0.5 million as their share of the parachute payments for Newcastle and WBA, because those two clubs went straight back up to the top tier.

However, the new Football League three-year TV deal that kicks off in the 2012/13 season will be £69 million lower than the current contract at £195 million, a reduction of 26% or £23 million a season, reflecting what Greg Clarke called, “a challenging climate in which to negotiate television rights.” As there was no interest from BBC, ITV or even ESPN, the only game in town was Sky, who could get away with a much lower bid. The annual reduction for each Championship club has been estimated at £766,000 by Ipswich chief executive, Simon Clegg.

Although TV has been the main driver of revenue growth at football clubs, it has only really been keenly felt in the Premier League. This is why people refer to the Championship play-off final as one of the most lucrative matches in world football with the value estimated at £90 million. Even if the promoted club came straight back down, it would receive £40 million TV income plus £48 million parachute payments over the next four years (£16 million in each of the first two years, and £8 million in each of years three and four) plus additional gate receipts and commercial revenue.

Of course, if it finished higher in the Premier League, the club would receive even more TV money and every season survived adds another £40+ million to the coffers. It’s incredible to think that just one place in the football pyramid can make such a difference. Given the spectacular difference in revenue, it is understandable why some clubs push themselves to the absolute limit to secure promotion, though it’s a dangerous game, as only three clubs go up every year, leaving another 21 disappointed.

One concern is that the club might eat into that higher revenue by increasing wages and other costs, but the net effect is still likely to be positive. If we look at the three teams that were promoted to the Premier League in 2008/09 (using the last available figures from 2009/10), we can observe this phenomenon with Wolverhampton Wanderers, Birmingham City and Burnley, but all three of them went from operating losses in the Championship to profits in the Premier League.

Where Derby do score well is in attendances, as they are one of the best supported clubs in the Championship. In 2010/11 their average crowd of 26,000 was only behind Leeds United, even though this represented a 3,000 drop over 2009/10. In fact, Derby enjoyed the 15th highest attendances in England last season, ahead of six Premier League clubs. Derby’s brief sojourn in the top tier produced a stunning average of 32,400, but this was actually surpassed last month when a sell-out 33,000 crowd watched the Rams draw 1-1 with league leaders Southampton.

Derby have frozen their season ticket prices for six years in a row, though this year supporters had to renew before the early bird deadline of 30 April. This is quite generous compared to other clubs, especially as the cost of the VAT increase has been absorbed and the price freeze applied even where seats were re-categorised to a higher priced area.

There’s no doubt that Derby were ahead of the game when they built the splendid Pride Park stadium in 1997 and they now have a splendid arena that has hosted a full international match and several England U21 games.

Derby’s commercial income of £7.5 million is made up of commercial activities £2.9 million, sponsorship and advertising £2.3 million, merchandising £1.6 million, programme sales £0.2 million and other receipts £0.5 million. In 2010 the shirt sponsor was changed to, replacing Bombardier, in a three-year deal. Financial details were not disclosed, but it is reportedly the largest sponsorship deal in the Rams’ history worth a seven-figure sum. The kit deal with Adidas runs until the end of the current season.

This is pretty good for a club in the second tier. Indeed, Tom Glick commented, “We know we are generating more than almost every club in the Championship.” However, the commercial boom that GSE promised when they bought the club in 2008 has yet to happen, as commercial income has actually fallen each year since then (admittedly after relegation from the Premier League).

On the costs side, the directors’ report in the accounts highlight the tricky balance that the club is striving to achieve, particularly in 2008, “The cost base of the club has been restructured in line with those of similar sized Championship clubs, but not to the detriment of the club’s ambition of returning to the Premier League.” Fine, but the large loss in 2007 was justified as “the cost of the investment… in a squad capable of challenging for promotion.”

The wage bill that year, when promotion was achieved via the play-offs, amounted to £17.3 million, but in 2010 (after three years of wage inflation) it is down to £16.4 million and has been further reduced in 2011, so the question is whether this is enough to mount a sustained challenge?

In fairness, in 2007 Derby’s wages to turnover ratio was a completely unsustainable 125%. To place that into context, big-spending Manchester City’s ratio is “only” 107%. The board has improved this ratio to a very respectable 55%, which is the third best in the Championship. However, and stop me if you’ve heard this before, this is largely due to the impact of the parachute payments. Without this, the ratio would be up to an uncomfortable 95%, hence the desire to keep cutting the wage bill.

In 2009/10 Derby’s wage bill of £16.4 million was around mid-table in terms of the Championship wages league with eight teams paying between £14 and £17 million. Tom Glick has said that the wage bill will come down to £9-10 million, but my guess is that he was referring purely to the players’ salaries, so the total cost will be a bit higher than that.

This is certainly achievable, given the departures of high earners such as Hulse, Commons and Robbie Savage since the 2010 accounts were published. In some cases, accounting losses have been made when offloading players, e.g. Claude Davis and Roy Carroll, in order to get them off the wage bill. Glick would actually like to go further, but he has found it difficult to move on surplus players such as goalkeeper Stephen Bywater and defender Dean Leacock, complaining of “very large wages that are non-productive for us.” Ouch.

This thrifty approach has also been reflected in the transfer market where Derby’s activity over the last four years has resulted in net sales proceeds of £1.4 million, though this is a little misleading, as there has been positive net spend in each of the last two years. Once again, this is par for the course in the Championship. Yes, many clubs have spent more, though only three have net spend above £10 million in the same period (Nottingham Forest, Hull City and Leicester City) – but equally many clubs have spent less.

However, this must feel like small beer compared to the net £22.5 million that Derby splashed out around the time of the Premier League promotion. In fairness, Derby have never been big spenders with their transfer record standing at only £3.5 million paid to Norwich City for striker Robert Earnshaw in 2007. Indeed, in the years following their receivership, they were consistent net sellers, virtually having to fire sale many of their stars.

Glick has certainly talked a good match recently, “We expect to put a side together that is capable of competing in the top six.” He added, “If the right player was available and we thought he was good value, we would be prepared to spend in excess of a Shaun Barker-type fee” (reportedly around £900,000). However, he acknowledged that not everyone bought into this undertaking when the club offered fans a money-back guarantee on their 2011/12 season tickets if they were not satisfied with the transfer business over the summer.

In the P&L, the low spending in the transfer market is reflected by the fall in player amortisation from £7.3 million in 2009 to just £2.9 million in 2010. This is the annual cost of writing down transfer costs over the length of a player’s contract.

Perhaps the crowning financial achievement is the substantial reduction in Derby’s net debt, which has been cut from £59 million in 2005 to £19 million in 2010. First, Peter Gadsby’s group waived repayment of £24.6 million in 2007, leaving GSE to take over debt of £31 million in 2008 (per Adam Pearson).

Second, GSE reduced this by £16 million (£6 million in 2008 and £10 million in 2009), so that the only real debt remaining is the £15 million bank loan with the Co-operative Bank, which is due to be repaid in 2016 (interest rate 2.5% over Bank of England base rate). The stadium is used as security for the loan, so this is often described as a mortgage on Pride Park, which is an asset valued at £55 million.

The reported debt also includes other loans of £4.7 million, but Glick describes this as “a revolving facility on a portion of the season ticket income, which shows on the accounts as an additional debt, but actually comes in and out every year.”

"Lay your hands on me"

This is an excellent position compared to many other clubs. Indeed, Football League chairman Greg Clarke observed, “Debt’s the biggest problem. If I had to list the 10 things about football that keep me awake at night, it would be debt one to 10. The level of debt is absolutely unsustainable. We are heading for the precipice and we will get there quicker than people think.” Derby would (now) appear to be an exception to that rule. As a comparison, neighbours Nottingham Forest have net debt of £63 million.

Another concern when new investors come into a football club is how much money they will take out of the club, but this is also not really an issue (yet) for Derby. Directors’ emoluments (essentially salaries) actually fell from £747,000 in 2009 to £424,000 in 2010, due to Adam Pearson’s departure. The highest paid director received £326,000, which I assume is Glick, as the chief executive normally earns more than the chairman, leaving £98,000 for (presumably) Appleby.

In addition, £189,000 of management charges were paid to GSE in 2010 (down from £375,000 in 2009) with the accounts stating that 2011 would be “materially reduced”, as there was less need to rely on third party services. Interest on loans from GSE of £152k has been accrued, but not paid. Glick also stated, “There hasn’t been a dividend yet and we’re not scheduled to pay any dividend to our North American owners.” At some stage, you’d have to assume that they expect a return on their investment, but not just yet.

In fact, GSE have been putting a great deal of money into the club via a series of capital injections, which is required as the cash flow before financing is consistently negative. Indeed, the latest accounts state, “forecasts indicate that additional working capital financing is required to enable the company to fund its business plan and to meet its liabilities as they fall due.”

My calculations suggest that GSE has put around £39 million into Derby to date, comprising £16 million to buy the directors’ shares (according to Appleby), £14.4 million equity injections (£7.7 million in 2009, £6.6 million in 2010), £1.7 million loan capital and £6.6 million working capital. The latter was reported as £5.6 million in the football club’s accounts, but I have used the £6.6 million figure from the parent company, General Sports Derby (UK) Limited.

Bearing in mind that the windfall from the parachute payments has come to an end, what will Derby’s strategy be going forward?

"Jeff Hendrick - one of the young soul rebels"

An obvious route is one followed by other clubs in a similar position, namely to invest in youth development, which is a policy Derby have embraced, increasing their investment in the academy in each of the past three seasons. Four players have graduated from the impressive Moor Farm academy this season: defender Mark O’Brien, midfielder Jeff Hendrick, forward Callum Ball and England U17 international Mason Bennett, who made the headlines when he became the Rams’ youngest ever player at 15 years and 99 days.

Commercially, the club has announced plans to develop Pride Plaza, the area around the stadium, with offices, shops and restaurants. A more ambitious development was approved four years ago, but was put on the back burner when the recession hit.

The commitment of the owners seems solid for the time being, having rejected a bid from former chairman Peter Gadsby to regain control of the club last year. Glick argued, “The owners have worked too hard to get this club in great financial shape and stable in so many other ways, and put in so much money, that to stop now would make no sense. We came here to make Derby County a sustainable Premier League club and we don’t intend to go anywhere until we have achieved that goal.”

"Ben Davies - Long may you run"

The introduction of new Financial Fair Play regulations in the Championship from the 2012/13 season should be advantageous for Derby, as they already aim to balance their books, while others have spent wildly and to a certain extent forced the agenda for other clubs. Glick, who incidentally sits on the Football league board, has confirmed that Derby will be able to exclude costs for their stadium and academy from the break-even calculation, so the Rams should be sitting pretty.

The owners’ philosophy was neatly summarised by Tom Glick, “We have a notion that it is possible to have a club that is stable financially that is also competing in the league.” The Americans can already take pride in their achievements off the pitch, but only time will tell if they can also deliver success in one of the most competitive divisions in world football. If they do manage to find that elusive balance and accomplish “more with less”, then their investment could well pay off, as Derby County clearly have a lot of potential with their fantastic facilities and large, passionate following.

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