Forest Green Rovers financials

The non-league club Forest Green Rovers caused a bit of a stir last December when it was reported that the club, owned by businessman Dale Vince, owner of electricity company Ecotricity, recorded a loss of £ 2,9 million in 2015. While losses of this size are not uncommon in the world of football, it is certainly exceptional to see a non-league club perform this way. After all, most non-league clubs´ turnovers are very small, and very few of them have wealthy owners backing up the operations with their £ millions. 

But then exceptional is exactly what Forest Green Rovers are. This is not just a regular football club. While any football club´s main purpose is normally to perform as well as possible on pitch, FGR don´t settle for that. Their aim is to be the ”greenest” football club in the world. As the latest annual report states, ”Ecotricity have invested significant resources in Forest Green Rovers Football Club Limited over the last few years in order to make it the world´s greenest football club, and achieve League status”. An ambitious goal, no question about it. But Rovers have really set out to achieve both goals. The club are currently second in the National League, two points behind leaders Cheltenham, and very much in contention for promotion two League 2. But possibly even more impressive is the club´s determination to actually be the ”greenest” football club in the world. As the Western Daily Press reported last November, the club has become all vegan on match days; Rovers stopped selling meat products four years ago, and as of last August, fish is off the menu as well. Cow´s milk has been replaced with a soya alternative, and even lager is animal-friendly. The menu now consists of vegan food, such as veggie burgers, Mexican fajitas, sweet potato burgers etc. The players have also been put on vegan diet, although as Vince told Stroud Life in November, ” We don’t tell people what to do at home. We just say what we believe in and what we do.” Food is not the only thing that the club has focused on. The pitch at the Rover´s home stadium is organic, and the club has installed eco-friendly solar panels to the stadium.

All the vegan, eco-friendly progress is made possibly by Dale Vince, the founder and chief executive of Ecotricity. Ecotricity is a company, that specializes in selling green energy to it´s customers, most of the energy is produced using wind mills. In 2010, Vince moved to football as he acquired the majority of  Forest Green Rovers´ shares.  Three months later, he became the chairman.  And from then on, his mission has been to make Forest Green Rovers…green. As Vince told GreenSportsBlog in March 2015, his motivation was two-fold, social and environmental. ”The club is a big part of the local community, with a rich tradition, and it needed rescuing. For us, it was an investment in the local community. Secondly, the club offered an opportunity to take our sustainable message to a new audience – a large and passionate new audience largely unaccustomed to dealing with sustainability issues.” According to Vince, being a succesful club only helps with the green message; ”The more successful the club is on the pitch, the more successful our sustainable message.” While the club currently seems to heading in the right direction results-wise, one needs to ask whether their sustainable message is compatible with a sustainable business model.

Rovers´ operations are funded by Vince, through his company Ecotricity, which is also the shirt sponsor of the team. Vince has invested heavily both in the squad, as well as the stadium. Looking at the profit & loss account of the club, the numbers are truly staggering. 

 

As is to be expected in case of a non-league club, the club´s turnover is modest. It has varied between £ 0,7-1 million during the last four years. But while the turnover has been relatively stagnant, operating costs certainly haven´t. The club´s EBITDA (earnings before interests, taxes, depreciations and amortisations) has been firmly negative, and with the assistance of small depreciations, the operating profit of the club has gone from £ -1 million to £ -3 million  within four years. During this time, ”other expenses” have increased by a million, and wage costs have more than doubled, reaching £ 2,1 million in 2014-15. That is just huge for a club whose turnover hasn´t really increased. The club´s profit & loss account pretty much ends in operating profit. There are some small interest payments, but they don´t really change the big picture. Loss for the year has gone from £ -1,1 to £ -2,9 in four years. As for any football club, wage costs form a lion´s share of the costs. As often said, sometimes the wage bill can be almost as big as the turnover, or even bigger. With Forest Green Rovers, it goes way beyond that.

 

 

While the turnover has remained stable, the wage bill has gone from £ 1,0 million to £ 2,1 million over the past four seasons. Wage/turnover ratio was as high as 240,7 %  in 2014, but thanks to the turnover increasing to £ 1,1 million in 2015, the ratio dropped to 192,6 %, which is still by no means modest. Turnover increase was partly due to the club playing in the first round of the FA Cup, whereas in 2013-14 the club were ousted in the fourth qualifying round. Even bigger factor is  the fact that Rovers´ average attendance has increased over the least few years, reaching 1501 in 2014-2015.

 

Obviously, this is not a sustainable business model by any means. Running a non-league football club this way really does need a wealthy backer, because it is hard to imagine any bank lending money to this kind of business. How would you even begin to amortise debt, when your staff costs are twice as big as your turnover? You don´t. Luckily, debt service or amortisations are not an issue, when you have a wealthy owner who is willing to supply the funds.

 

Looking at the balance sheet, the club´s equity has obviously decreased due to the losses it has been making. By the end of FY 06/2015 it was £ -2,9 million. Equity was as low as £ -4,1 million by the end of FY 06/2014, but due to a new share issue worth £ 4,1 million , total share capital increased to £ 5,3 million and improved the total equity. Equity ratio (equity/total balance sheet) by the end of last season -113,7 %. Total liabilities at the end of last season were £ 5,4 million. It is worth noting that practically all of this is short term liabilities, only £ 19 685 were long term. The majority (£ 5,1 million) of these liabilities is owed to group undertakings. As can be seen, this amount was even bigger at the end FY 06/2014, but part of that debt was converted to equity in 2014-15. According to annual report, amounts owed to group undertakings are ” interest free and repayable on demand”. In reality, the club will not be generating enough cash flow to repay these loans, instead they are renewed every year, with possibly some of it being converted to equity.  Bank loans and overdrafts form a small part of the debt. Since the cash reserves  are very modest, the club´s net debt has increased substantially over the past years.

 

Again, the dip in net debt in FY 06/2015 is due to the conversion of debt to equity. Still, a net debt of £ 5 million for a club whose turnover is £ 1,0 million is just huge. But as with so many other football clubs, there is really no problem as long as the owner has patience and is willing to keep on supplying the funds.  In this case, patience doesn´t seem to be an issue. As Dale Vince told Western Daily Press last November: ” Everything we do is meticulously planned and for the long term, and football has become a big part of what we do at Ecotricity. It's about pushing back the boundaries and it's exciting”. Vince has stated that the club´s goal in the short run is to achieve a promotion to League 2. In the longer run, the club´s aim is to get to the Championship. In addition to making progress on the pitch, the club is also in progress of building a new facility which will include a new stadium. The cost for the ”Eco Park” is forecasted to be aroud £ 100 million. In July 2015, Vince estimated that building the site would take around five years. In addition to top notch sporting facilities, a new stadium and training fields, Eco Park will also include a green technology business park.

But not everyone is impressed by the road taken by Vince and the Rovers. There have been accusations saying this is extremely bad for the competition, since very few (if any) clubs other than the Rovers have this kind of financial backing and are therefore unable to respond competitively. Huge wage bill paid by Rovers is also said to inflate the player values at this level. Since Financial Fair Play rules do not apply to Non-League clubs, even that is not slowing down the Rovers. Frankly, it is easy to agree, at least on some level. Wealthy owners injecting funds to clubs is nothing out of the ordinary on higher levels of the game. But at this level it is rare, and there is a risk that the competitive aspect suffers greatly. On the other hand, is there really anything wrong with what Vince is doing with the Rovers? Isn´t it exactly the same as the trend started by Abramovitsh at Premier League –level years ago? The trend, that has now spread to the majority of Premier League, and to lower levels as well? Yes, it inflates player values. Yes, it disrupts the competition. And yes, it is a bitter pill to swallow for those clubs that don´t have the same kind of financial resources at their disposal. But who is to say at which level it is okay to operate like this, and at which level it isn´t? This is obviously not a question that has a concrete answer. Rather, it is just food for thought. In an ideal world, the Conference would be about fair competition where promotion to the League 2 is not decided by money. After all, isn´t that what football is supposed to be about? Then again, ”ideal” and ”fair” are concepts that have been bent and distorted by money for a long time at the higher levels of the game.

As it stands, the Rovers seem to be firmly on their way to League 2. It will certainly be interesting to see how far Vince can take the Rovers, if they do manage to get promoted to League 2. Most likely some additional financing is yet again required to be competitive at that level. Even more interesting than results, is whether he can actually create a succesful club with a large fan base while simultaneously promoting the green message, which is such a big part of the club´s philosophy. Is it possible to attract a wide enough fan base to fill the new facility, while only serving veggie food? Maybe, but it is not easy. Whatever happens, it is an important message that the Rovers have. Increasing the public´s knowledge and responsibility on environmental and sustainability issues is always a good thing. If something like that can be done through football, why not do it? And hey, who doesn´t like a good falafel..?