“The reality is that I’ve never seen a more bust company than Plymouth Argyle Football Club was when we took it over” – James Brent, 2016

That was how James Brent described the financial situation at Argyle during a fan’s forum in 2016. He wasn’t wrong. Argyle had barely survived the most tumultuous period in their entire history, on and off the pitch, and it wasn’t over.

The financial mess

Brent took over on the back of chronic financial mismanagement. Collectively, Paul Sturrock and the board had overspent: they broke Argyle’s transfer record twice with deals for Steve MacLean and Simon Walton and made Emile Mpenza the highest paid player in the club’s history on a reported £10,000 per-week.

Even then, he admitted that many of the players he had signed were “duds from lower and non-league level”. Despite the fact that both he and the board were aware of the financial trouble that was building, they continued to allocate and spend money in a bid to keep Argyle in the Championship.

However, this was hardly anything new. For years, Argyle’s spending had been growing, driving by an ever increasing playing budget. If the story of Brent’s ownership begins anywhere, it was in summer 2006. The wage bill was already increasing in order to keep Argyle in the Championship, but once Ian Holloway arrive the club started to think that the Premier League was possible.

These thoughts were further driven by an attractive style of play, run to the quarter-finals of the FA Cup and five consecutive wins to end the season. In 2007/08, the club finished tenth, six points short of the play-offs – you could almost reach out and touch it.

Just as in the story of Icarus, Argyle flew too close to the sun and got burned. The club could sustain a certain amount of losses, but from 2007/08 on the spending became so chronic that the debt grew at an uncontrollable rate.

Year Wages as a % of turnover Profit/Loss
2008/09 87.2 % -£2,800,000
2007/08 74.4% £1,400,000*
2006/07 65.8% -£829,000
2005/06 62.6% -£465,000
2004/05 42.6% £619,000

In the end, the only profit Argyle posted from 2006 to 2010 came following a January fire-sale in 2008. Sylvan Ebanks-Blake, David Norris, Akos Buzsaky, Dan Gosling and Barry Hayles all departed for a total of around £6m. Peter Halmosi stayed for the season only to leave for a further £2m in the summer. Long-term players Paul Connolly, Lillian Nalis, Lee Hodges and Paul Wotton left upon the expiry of their contracts and Luke McCormick had his cancelled by the club following his arrest. In the space of just over six months, the squad that had pushed Argyle so close to a shot at promotion was torn apart.

But that hadn’t stopped the club from dreaming. The players were replaced at great expense. Yet, while the financial outlay matched, and sometimes exceeded, that of the previous cohort, the quality did not. The club transitioned from having an expensive squad pushing for promotion to an expensive squad fighting relegation. Attendances and income dipped, but spending continued to grow.

The attitude exasperated everything. The Championship at all costs mentality merely ensured that the club ran ever less sustainable deficits with the aim of avoiding relegation. The dream of the Premier League had convinced the fans and management alike that the Championship was Argyle’s natural place. They gambled the short term success of the club only to bury its future.

“The directors believe Argyle staying in the top two tiers of the league is paramount for the future of the club” – Club statement, 2009

When relegation finally came about, the clubs income was significantly reduced but expensive, long-term contracts ensured the playing budget held steady at around £8m. Ultimately, the failed World Cup big was the final nail in the coffin, and the club soon moved into administration. In truth, it had been on life support for more than long enough. The club suffered – the community suffered – through a nightmare period in administration, before finally – finally – James Brent was confirmed as the new owner of the club.

The turnaround

The turnaround was far from instant. It was – is – a gradual process that is still occurring as you read this. It can be broken up into two parts: the clearing of legacy debts and the balancing of the budget.

Before Brent’s takeover, the debt totaled £17.7m, over four-times Argyle’s turnover at the time. A company voluntary agreement enabled the club to cut more than £7m worth of that debt before Brent was even allowed to negotiate his potential takeover with the club. Following the takeover, only £3.6m of “legacy debt” was left to be paid: a lump sum upfront followed by yearly contributions and the remaining 50% balloon payment after five years had passed.

Putting aside the fact that more than 240 creditors owed by the club were paid 0.77% of the money they were owed, Argyle finally cleared the last of the £17.7m debt in by making the balloon payment in October 2016 with the help of a loan of £800,000 from Plymouth City Council. Servicing debt took a hefty amount of budget from Argyle’s playing squad, while half of all unbudgeted income during the those five years was allocated to the balloon payment, though in the end that only amounted to around £200,000.

You may notice that the numbers that I am stating are becoming less precise, often prefixed with the word “around”. This is because Argyle’s finances have become less clear in the years since 2009. Initially, this was because the clubs financial accounts were (and still are) posted at least 18 months after each financial year, so accounts for 2009/10 and 2010/11 were never made public due to collapse of the company owning the club. Thereafter, the only numbers available have been generalisations from those who had seen the accounts and best guesses from those clued up.

More recently, the lack of specificity has been because the club has only published a yearly balance sheet and not their profit and loss account. The balance sheet contains some useful information, such as the overall profit or loss made by the club and it’s current level of debt, but the club’s exact turnover, distribution of income, total wage bill and so forth are all contained in the latter. It should be noted that Argyle are legally entitled to publish limited accounts due to the size of the club, and that the old regime had no choice but to publish full accounts during the Championship years for the opposite reason.

Additionally, Argyle have only published their accounts annually, rather than in the financial year or for the season. This further obscures the accounts as they are split over two distinct periods: the end of one season and the start of another. Therefore, the accounts they produce don’t show season-upon-season changes, but year upon year. Again, the best information we have is based upon generalisations in club statements and best guesses.

This brings us onto the finances, which Brent summed up quite nicely:

“We came into Argyle as a football club which, before we took over, had lost £8m on £10m of turnover. The turnover fell to £4m because it collapsed down the leagues with consecutive relegations. We’ve turned that into a break-even position on £4m of turnover while improving the football squad” – James Brent, 2014

Clearing the debt was just one hurdle, a lump sum that needed to be paid. But turning the clubs finances around was another altogether. Don’t forget, Brent took over with the season having already begun: a wage budget was set; season tickets sold; a squad had been acquired. The wage budget even included former players who were still being paid by the club. Argyle made huge losses of £2.5m and £1.5m in the first two seasons following the takeover.

These deficits were covered by investment. First, a parcel of land at Home Park was purchased by a firm mostly run owned by Brent for £425,000, with a further £275,000 being raised through sales of shares. Following this, Brent issued further loans to the club until early 2014 when his credit stream began to dry up following major business concerns in his other financial ventures. At this point, Tony Wrathall – a member of the board the threw Argyle into financial collapse – was invited to return in exchange for investment to plug another funding deficit.

All of a sudden, Argyle had built up debt of £6m, far more than the club’s turnover in a year. Along with this, performances on the field were consistently poor. Argyle finished both seasons in 21st, surviving thanks to other results on the final day of the season in 2012/13. Meanwhile, commercial investment had collapsed since administration, so despite the poor quality on show, average attendances of seven-thousand were keeping Argyle from immediately falling back into complete financial turmoil.

Fortunately, it was at this point that things decisively turned around for the club. In hindsight, 2014 was the turning point for a club that had finished in the bottom four of the league for five consecutive seasons. On the field, under John Sheridan performances picked up and Argyle began to climb the table, setting the stage for three consecutive campaigns of challenging for promotion instead of fighting for survival. Off it, Argyle posted a profit. It was a small profit of £19,930, but it meant one thing: the club had stopped losing money.

It may go unsaid around the supporter base, but from his arrival in 2013 to his departure last summer, chief executive Martyn Starnes played a big role in this turnaround. The clubs turnover had increased (how much by, we may never know) and the spending had been cut, mostly by completing the payments to former players from the administration period. Brent had achieved his initial aim: self-sufficiency. Upon joining the club, his intention was never to bankroll a charge up the league, but to utilise Argyle’s streams of revenue to progress the club to its natural place. In the years since, the club has continued to post minimal profits or losses, reinvesting the money generated back into the team and surrounding infrastructure.

Graph demonstrating the change in Plymouth Argyle's finances across the period from 2012-2017, showing the progress from net loss of two-and-a-half-million pounds in 2012 to a marginal profit in 2017 and reduction in total debt from five-million pounds to two-million pounds across the same time period.

The playing budget

“We don’t want to fund losses for the club. That’s what happened last time. We didn’t fund losses, we just incurred the losses, just didn’t pay them and went bust. We’re not going down that route” – James Brent, 2016

As the club’s turnover increased – climbing to around £6m in 2015/16 following a rise in attendance – the wage budget was able to increase with it. The balloon payment aside, the majority of the remaining debt was owed to the clubs directors who had invested money to cover the deficits in the previous years. Much of this debt was, in effect, written off during 2016 when it was converted into shares.

Unfortunately, we are unlikely to ever know the wage budget between in the years during which Brent was chairman. This makes speculating upon anything related to wages very difficult. The best guesses that I have seen place it somewhere around £3m, one of the lowest in the division. Of the clubs to publish their total wage accounts for 2016/17 (which includes all non-playing staff), that would leave only AFC Wimbledon spending less (£2,519,528) with Walsall (£3,122,000) and Blackpool (£3,181,855) spending similar.

A graph comparing a series of League One teams' turnover to their wage budget.

Sides like Fleetwood, Scunthorpe and Southend spent at least one-million-pounds more than Argyle are predicted to have, despite having average attendances that were thousands less than the 9,652 that Home Park hosted. These three sides have another thing in common: they all posted losses of at least £2m for the year. Overall, Southend United have debts of £21m, Fleetwood £15m, Scunthorpe £8m. The clubs rely on their owners to underwrite the debts, like many of the clubs in this division.

Similarly, sides like Bristol Rovers, Coventry and MK Dons, who averaged similar attendances and turnovers all spent roughly one-million-pounds more than Argyle. Bristol Rovers lost £1.3m, with their total debt rising £11m; Coventry lost £2.7m, with debt now standing at £19m. MK Dons posted a profit in 2017, but only by selling players following relegation from the Championship.

The three sides promoted from League One in 2016/17, Sheffield United (£5.7m), Bolton (£4.4m) and Millwall (£4.0m), all made significant losses for the year. Argyle and Sunderland aside, the average level of debt for League One’s current clubs is £10.6m. The majority of the big spending sides in the division that avoided a significant loss in 2016/17 did so through player sales: Charlton made a profit of £1.4 through £16m of sales; Oxford posted a profit of £650,000 by generating £3.4m in sales; Barnsley made a huge profit of £12.8m through more than £13m of sales and increased revenue from being in the Championship. Likewise, Burton made a £1.1m profit because of the extra income (roughly £6m per-year) generated from being promoted.

We don’t yet know how now owner Simon Hallett will run the club: will he boost the wage budget of the club and underwrite the losses or will he continue the self-sustainable model introduced by Brent. Most likely, it will be the latter. In which case, Argyle will look to increase turnover by increasing commercial income through better sponsorship deals and the additional non-matchday income from the redeveloped grandstand (estimated to be £1m per-year). This additional revenue would then be returned to the club to expand the playing budget without incurring losses and debts, similar to those incurred between 2007-2009.

Indeed, without an owner to underwrite the debts that would be incurred by expanding the playing budget, appealing for Derek Adams to be given more money would probably be unsustainable. In fact, each of the last four promotions the club achieved were done so while maintaining a sustainable wage budget. Promotion in 1996 came with wages representing 40.8% of turnover; in 2002 it was as 43.1%; in 2004 it was 49.1%. No doubt Derek Adams achieved it by spending less than 50% of the club’s turnover, though it’s unlikely we’ll ever know for sure.

It should not be forgotten that spending more has no guarantee of success. Think Tottenham after Bale or Liverpool after Suarez. Closer to home, Sheffield United finally achieved promotion from League One in 2017 after despite reducing their wage budget by 13%

Year League position Wage budget Net loss
2016/17 1st £5,900,000 £5,700,000
2015/16 11th £6,800,000 £8,600,000
2014/15 5th £5,500,000 £3,300,000

This has only been a general overview of the circumstances leading to the Brent’s tenure as chairman and owner of Plymouth Argyle, and the finances during. There are more extended accounts available of the disastrous period from Sturrock to Fletcher, while details about Brent’s ownership are hard to come by, despite promises of transparency.

However, if there’s one thing to note about this article, it’s that we’ve been here before. A relatively small club, one that has only achieved an average home attendance of more than 10,000 in eight of the previous 30 seasons, and spent more time in the fourth tier than any other during that time. There are three ways the club can progress: grow organically by expanding the fanbase; boost the income by increasing commercial revenue; a wealthy owner who is willing to underwrite the financial shortcomings.

The first two would be the best and safest ways to achieve growth. The latter is always a risk – Southend appear to be the latest club headed for very troubling waters because of it. Investing unbudgeted income on improving the infrastructure around Home Park will benefit the team for years to come by boosting revenue or attracting new players. Spending it on a one-time shot at promotion would do nothing to guarantee success.

Those who continually advocate raising the wage budget – without having any accurate idea of its current size – to the level of sides such as Southend and Bristol Rovers, or even Fleetwood, with no means of plugging the financial gap, hold similar attitudes to those that unknowingly cheered the club as it laid the groundwork for administration a decade ago. Less than ten years on from the club’s near-collapse, and following the first transfer in ownership since, that should weigh heavily in the minds of all of the Green Army.

Read more – James Brent: A Legacy

Author: Nick Saunders Smith

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