Cardiff’s financial challenges

It wasn’t easy to decode what Cardiff City FC’s finance director Doug Lee was saying in this interview.   I am not an accountant but I think in very simple terms his message was that the football club, from a financial point of view, is in what President Bush used to call ‘deep doo doo’.

It wasn’t easy to decode what Cardiff City FC’s finance director Doug Lee was saying in this interview.   I am not an accountant but I think in very simple terms his message was that the football club, from a financial point of view, is in what President Bush used to call ‘deep doo doo’.

His argument really splits into two parts.   First, spelling out how big a mess the club is in.  Second, defending the strategy of the Malyasian investors by arguing that South Wales is a small market and the Far East is a massive and growing one.

As far as the financial problems are concerned, the headline debt figure is £70m and the club is losing £1m a month.  The Langston loan is a major hurdle to financial stability because it stops conventional borrowing and growth.

But, then, as Doug Lee points out, UK banks don’t want to take on any new borrowing with football clubs.  They are simply too risky.   Indeed, the way things are going, they may not have any money to lend to anyone.

He points out that Cardiff are currently a South Wales-based brand and not even a UK one.  There are limits to what you can do in that market given its population size – and its level of prosperity.  Even if the ground was sold out for every home league match it would only add £1m a year to turnover.

In the Far East ‘perhaps we can tap into a billion people … who might have some interest in the club.’   But it’s a big perhaps.   Why would they be interested in a club that has a limited profile outside Wales?   The profile would be raised if the club got into the Premiership, but it is not my impression that there is a lot of attention being paid to Swansea City in the Far East, certainly not compared with Liverpool or Manchester United or perhaps now Manchester City.   Arsenal are going to China to try and boost their profile in the summer.

He does, however, answer one of my earlier concerns.   The revenue from shirt sales is negligible, even if it is red and has a dragon on it.    However, the shirts are seen as a basis of a drive for sponsorship and other commercial activities.

Even so, Cardiff City do face big challenges and there is no easy way out.   If the Malaysians walked away, the situation would become critical.

If this is part of a public relations offensive, it should have started earlier, albeit that the club’s plans were leaked.