Scottish Premier League club Partick Thistle are enjoying a
good run at the moment. The Glasgow club has always been the ”third” club of the city, traditionally miles behind Celtic and Rangers, results-wise,
finance-wise, and attendance-wise. The small, symphathetic club has been forced
to live in the long shadow of the Old Firm, but Partick Thistle has certainly
made the most of it, and currently the club is in a healthy position, with
plenty to look forward to.
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| Photo by Thomas Nugent [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], source: Wikimedia Commons |
Things didn´t always look that bright for Partick. Back in the late 1990´s the club was in such
dire straits, that the only thing keeping them afloat was a fan-organised
campaign, Save The Jags. The club was saved, but eventually relegated to the
third tier of Scottish Football. The club managed to climb back, eventually all
the way to the Premiership, but financial worries never went away. In 2002,
Thistle built a new North Stand to their stadium, Firhill, in order to meet the
criteria set by the Scottish Premier League. This caused the club´s indebtness
to weaken. Somewhat ironically, the Premier League later lowered its criterion
on stadium capacities, making Thistle´s investment somewhat useless. Thistle
tried to follow a prudent policy, but as so often, it is not easy for a
football club to operate profitably, especially since Thistle has spent a
notable amount of time outside the Premier League. Add to that some unexpected,
exceptional issues, and the whole house of cards easily becomes close to
collapsing. And Thistle was no stranger to these kind of events. Around 2010-2011
things somewhat escalated; In September 2011, The rugby club Glasgow Warriors,
who had played their home games at Thistle´s home stadium decided to move,
reducing Thistle´s rental income. In January 2012 Sangs (the parent company of
Thistle´s then shirt sponsor) was forced into administration. This was
obviously a setback to Thistle´s budget. Things didn´t look too bright, and
chairman David Beattie told STV: ”Over
the past three years, the directors of the club have been working really hard
to make Partick Thistle a sustainable business. The loss of revenue of the Warriors
and the sponsorship doesn´t make life any easier. I would prefer to be starting
with a sustainable budget where even if we are earning no money, as long as we
are not losing any money, then we can start building things. But every year, we
are starting at a negative. That takes the focus away from the team.” He
also added; We want to stay a full time
club. That is dictated to by sponsorship income. Primarily, it is dictated to
by the amount of attencdances clubs get at their stadiums.”
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| Firhill Stadium, photo by Chris Upson [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], source: Wikimedia Commons |
According to Daily Mail, by 2008 Partick Thistle´s bank debt was at £ 1,5 million. I´m not sure where
that figure comes from, since according the accounts of 2008 that was the total amount of creditors. This normally
contains trade payables, deferred payments, etc, which are not interest bearing
liabilities. Based on this, it is unlikely that the bank debt itself was
actually this high. However, it is hard to say for sure, since Partick´s accounts
from this time are ”accounts for a small company”, meaning there are no notes,
and therefore no accurate breakdown of liabilities.
Starting from 2014 Partick´s accounts have been ”accounts
for a medium company”. Since the accounts of 2014 also include figures of 2013,
we can do a more detailed analysis using that as a starting point. Partick´s
balance sheet looks as follows;
Short term liabilities were £ 1,1 million in 2013, but as I
mentioned earlier, a company´s liabilities (and especially short term
liabilities) normally include several non-interest bearing liabilities, which
are items related to normal running of operations. In Partick´s case, short
term interest bearing liabilities (bank loans and overdraft) were £ 0,4 million. Long term bank loans were less than £
0,2 million, and total net debt £ 0,55 million. By 2014, some of the loans were
refinanced, since short term bank loans and overdraft declined to £ 153 000,
while long term bank loans increased to £ 469 000. In total, the club´s net
debt varied very little during this time. The situation was not improving if
not really weakening, either.
It wasn´t until late 2015, that the Jags really hit the
jackpot, and got their debt situation in order. This wasn´t done by any kind of
sudden improvement in operating profitability, or a new, wealthy arab owner or
anything of the sort. No, Partick Thistle basically won the lottery. Or to be
more precise, two of their fans, Colin and Christine Weir won the EuroMillion
draw back in 2011, and won a staggering £ 161 million. Of this, they had
previously invested £ 750 000, which was used to set up a youth academy. Now
they took their support to a whole new level; The couple bought a 30 % -stake
of the club, only to donate two –thirds of that to a fans´ group. Both retained
a 5 % stake to themselves. On top of this, board member Billy Allan also bought
a 3 % stake. As can be seen from the balance sheet, this increase in equity
allowed the club to pay back its bank loans and overdraft. By the summer of 2016,
the loans were gone, and the club´s cash balance was at a healthy level at £
0,3 million. Not a bad situation at all. Net debt had turned negative by the
same amount.
The club´s chairman
David Beattie was obviously delighted to see the arrangement happen, telling Daily
Mail; ” First and foremost, I would like
to thank each of our new investors on behalf of the club and all its
supporters. Their investment has allowed us to secure the financial stability
we promised fans at the start of the season.”. He continued, ” As genuine Partick Thistle fans, they have
allowed us to start a new chapter in the history of the club, which I hope will
allow us to move on and establish ourselves fully as a Premiership staple for
many seasons to come. ”
How much money did actually come to the club as a result of
this arrangment, then? The easiest way to grasp an idea of this is to look at
the club´s cash flow statement.
Looking at the end of the cash flow statement of 2016, we
can see that the club received £ 1,084 million from new share issue. After
repaying the loans of £ 0,48 million, there was plenty of cash to pocket in the
cash balances, lifting the total cash reserves to £ 0,4 million. In 2016, cash
flow was also supported by negative net interests paid (£ 0,17 million). Where
this interest received was generated is not stated in the accounts, but
nevertheless, it was a substantial part of the Jags´ cash flow. Looking at the
previous years, it is easy to see the tight spot that the club was in. Money
generated by operating activities was not much, and it was basically consumed
by interest payments related to the bank loans and overdraft. What this
basically meant was that any cash outflow (investments, buying players etc)
after interest payments would have to be financed by using cash reserves (impossible,
because there hardly were any), equity injections from the owners, or new
loans. In Partick´s case, this meant loans. And the thing with loans is that
they are supposed to be amortised, which means that you need to generate enough
cash to do so, or refinance the loans from time to time, which usually means increasing costs related to loans. Basically, it can easily become a vicious cycle that is hard to break,
and this was more or less the reality for Thistle, as well.
Not that the club was by any means reckless with their
spending. The club´s only capital expenditure over the past four years have
been minor investments in tangible assets (stadium, facilities, etc.) Combined
amount of these over the past four years was only around £ 0,1 million, which
is not much by any means. There have been no overly ambitious stadium projects,
no wild spending on players, or anything of the sort. Because of this, the
club´s net debt actually remained quite stable up to the point the club repayed
its loans, which, given the circumstances, was not a bad effort at all. Adding the
fact that Thistle managed to get promoted to the Premiership and have held on
to that position since then with financially such a small room for manoeuvre,
and it´s actually a pretty impressive feat.
Looking t the Jags´ profit & loss account, you can see
the notable increase in turnover from 2013 to 2014. This is due to the
promotion achieved in 2012-2013, when Thistle won the Championship. Since then
turnover has been around £ 3 million. This is obviously miles away from the
turnover levels of Premier League clubs, for example, but that is the harsh
reality for Scottish clubs outside the Old Firm. Thistle´s EBITDA (earnings
before interest, taxes, depreciations and amortisations) tells a similar story
than that of the clubs cash flow. In three of the past four years, the club has
recorded a positive EBITDA, which is a good achievement, and a testament to the
club´s prudent approach to running of the club. The only negative year was
2015, when the club´s EBITDA sunk to £ -0,2 million. This was mostly down to a
decline in attendance figures, as David Beattie told BBC in August 2015; ” We always aim to have a break even budget,
although this year we´re probably going to show a loss because crowd numbers
are down quite a lot, which took us by surprise.” Turnover did increase that year by roughly
£ 0,2 million, but apparently the club had budgeted a bigger increase, since
the wage bill increased by £ 0,4 million, hence the EBITDA of £ -0,2 million. In
2016, turnover did increase to £ 3,3 mllion, and since the wage bill increased
only slightly, EBITDA returned to being positive.
Speaking of wages, the club´s wage bill increased significantly for the season 2013-2014. That was obviously a result of the promotion to the Premiership, and consequent investments to the squad. While the club was playing in the Championship, the wages/turnover ratio was around 55 %, increasing to 59 % the next season. These are not reckless numbers by any means, and the ratio has been very stable over the past four years. In 2015 the ratio increased to 67 %, but as mentioned earlier, this wasn´t really a result of a notable increase in wages, but more a decline in attendances, causing to turnover to remain at a lower level than anticipated.
Going back to the profit & loss account, we can see the
same as what was already apparent in the cash flow statement; the interest
payments, while not large sums as such, have consumed a majority of the EBITDA,
effectively bringing the total profit close to break even –level (excluding
that 2015 of course, and 2016, where interest received was £ 0,2 million).
Another thing to note is that the profit & loss account doesn´t include any
amortisations of players contracts. This is because Thistle haven´t really
bought any players in recent years, all arrivals have been free transfers, or
loans. Obviously the club´s financial situation hasn´t really allowed to them
to splash out on transfer fees.
As the club is now free of debt, what kind of signifigance
does that have for the club´s operations, and what´s next for Partick Thistle?
David Beattie spoke to BBC about his long term goals for the club already back
in 2015. As Beattie said, ”I would also
like to not be known as that nice wee, cuddly club. So we´re using a strap line
called Not So Cuddly Anymore”. He continued; I´d ike us to be everybody´s first club, but I hate the whole scenario
of ”Partick 0” and all that kind of thing from years ago. That can be
derogatory to the football club and to everything we´re trying to do. I´m very
happy that everybody looks at us as a nice club, but we´re a serious club”.
With the club playing at the highest level of Scottish
football, and with the balance sheet free of debt, there´s certainly no reason
for anyone not to take Partick Thistle seriously. However, it would be
unrealistic to think that being free of debt would turn the Jags into title
contenders or anything of the sort. The most immediate aspect of getting rid of
debt is that the club no longer needs to pay interest payments related to it.
Interest payments in previous years had been around £ 50 000, so should the
club wish to continue operating at a break even –level, roughly that amount
could be added to the wage bill, for example. Loan amortisations are obviously
also history. The amortizations that the club made over the last years
excluding refinancing arrangements were around £ 40-45 000/year. Adding this to
the interest payments, roughly £ 100 000 would now be free to be used in other
ways, for example investing to the facilities, increasing the wage bill etc.
Since the wage bill has been at around £ 2 million, it would obviously not be a
huge increase, but an increase anyway. The point is, being debt free obviously
gives the club much more room for manouevre, and it frees them for financial
strangehold of banks, which is not a small feat. But if the club wants to
invest heavily in the playing squad or facilities, or increase the wage bill
substantially in order to attract bigger names, that money still needs to come
from somewhere, be it in the form of equity injections or owner loans, etc.
Given the fact that the club has been very prudent with its finances, that
seems an unlikely scenario.
Another option for any company wishing to increase operating
costs but not willing to increase losses, is obviously to increase turnover. Scottish
tv-deals have not been very lucrative for clubs lately, at least if you compare
them to those of the Premier League. Below is a chart describing the tv –money
distribution from last season.
Partick Thistle received roughly £ 1,1 million. Using these
figure as a reference, improving that position to 6th, for example would lead
to additional £ 211 000. That´s not a small amount for a club like Thistle.
Another way to increase revenues would obviously be to increase attendance.
This has been somewhat of an issue for the Jags.
As mentioned earlier, Thistle´s attendance figures declined
in 2014-2015, which was somewhat of a surprise for the club themselves. In
2015-2016 average attendance bounced back to around 4000, but was still below
that of 2013-2014 season. Compared to
other Premiership clubs last season, the Jags´ average attendance was at the low end of the table.
Glasgow Celtic are obviously in a league of their own in
attendances, followed by Hearts, Aberdeen and Dundee United, all far behind
Celtic. From Ross County (average attendance 4 137) to St Johnstone ( 3 751),
there isn´t much difference between the clubs. But what makes Partick´s figure
stand out from that group, is that the population of all the other towns are
well below 100 000 (even below 50 000, like Inverness, Kilmarnock and St
Johnstone), whereas Glasgow´s population is obviously much greater. Looking at
it this way, Thistle should be able to attract much bigger attendances.
Of course, it really isn´t that simple. Any club located in a
major city faces a lot of competition for their audience.
In smaller towns, the local football club is often what brings people together,
and creates that ”us against them” –spirit. It is the talk of the town around
workplaces, pubs, schools, you name it. But in larger cities, that spirit is often
absent, and there are more options to choose from, when considering what to do
on a saturday afternoon, be it theatre, concerts, other sports etc. In Partick
Thistle´s case, the unfortunate fact is that the club is not the biggest
Premiership club in town, not even the second biggest, but third behind Celtic
and Rangers. And it´s very, very hard to compete with the history and prestige
of those two clubs. A casual fan looking for a football match will often check
the fixtures of Celtic and Rangers first, and Thistle only if those two are
playing away matches. The shadow of the
old firm is a long one, and makes it difficult for Thistle to attract much
bigger audiences.
In Thistle´s credit, it should be noted that they haven´t
taken the road of cheap ticket pricing to attract bigger audiences. According
to BBC´s ”Price of football” – survey, Thistle´s cheapest match ticket ( £ 22)
is slightly above the Premiership´s average. This is probably a smart way to operate;
as David Beattie said, Partick wishes to be taken seriously, and lowering
ticket prices in order to attract bigger audiences would certainly not help
that cause. Going a bit off-topic, a full house achieved by lower ticket prices
is often not the ideal situation from a financial point of view, either. A full
house basically means that demand for tickets has been greater than supply,
since it is safe to assume some fans have been left without a ticket. This
means that the club would have been able to attract a bigger price for their
tickets. Another way to look at it is this: If a club lowers ticket prices in
order to attract a full house, the income from extra tickets sold is
often offset by a lower price of a single ticket. This is a bit off topic, but
suffice to say that ticket pricing is a difficult form of science, and not a
very exact one.
All in all, Partick Thistle are in a good place at the
moment. With a stable financial position, and currently a 6th place spot at the
Premiership, there are plenty of positives for the club. Without additional investments,
going further than that might be difficult, but time will tell whether Thistle
will find a way to do that as well. At the moment, the biggest question mark
with the club is just what is going on with the bizarre mascot, Kingsley? Unveiled
in 2015, Kingsley has been described as ” a demented sungod” and ”Lisa Simpson
on meth”, among other things. However you look at it, pretty it is not. But Kingsley
has become a bit of a phenomenon in social media, and brought publicity to the
club, so it seems like Partick are winning in this area, as well. Apparently
it´s all tailwinds at Firhill at the moment.
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| Kingsley, Photo by Andrew Hendo (Taken at a media event in Glasgow) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], source: Wikimedia Commons |
