Scott Duxbury: Part Two
Filed: Monday, 29th June 2009
By: Graeme Howlett & Gordon Thrower
KUMB: The club's accounts have been held back twice now. What's the current situation?
SD: I think they are due to be published mid-to-end of August. The reason why they were delayed in the first place was that in order for our accounts to be audited and us to be confirmed as a going concern you need to declare all liabilities - and where you're not sure, you need to give an estimate of what you believe it will be.
So when we were negotiating with Sheffield, if we had put a figure in there as to what we believe that liability will be clearly it would hinder our negotiations somewhat. So we took the view that we were going to delay the accounts pending the negotiations with Sheffield, and then they would be published.
KUMB: Okay. I think a lot of the queries will be settled when we actually see the accounts.
SD: The accounts were a disaster; we've had absolute Hell. We've had the owner going bankrupt, XL ... it's been an absolute disaster. Ironically the past year-and-a-half has been the best it's been because we haven't had an owner, we've been able to just get on and run the club without interference and basically implement the business plan.
But we've had massive pressure from the banks. The collapse of our various partners and owner coincided obviously with the banking world just being absolutely destroyed. What happened was, when Eggert came in we embarked on a massive player acquisition programme. It's not just the transfer fees, it was the salaries that were given. And all of this, we didn't know, was bank funded - it wasn't owner funded. Then the banking world collapses and they said 'we want our money back'. Fantastic.
So we've had to enter a period where we've had to reduce our debt through player disposals and making sure we're self sufficient. Now ironically, with BG having the problems that he was, that allowed me then to just get on with that - plan, budget and do the player disposals. So when I said in the January window that players wouldn't be sold I was confident that there was no interference from above and I could deliver what I said.
But the big arguments and the big problems have been with the banks. I remember being sat around in January with two days to go before the window and the banks are saying 'you must sell Scott Parker'. I had a huge, huge row and said 'I'll leave then, that's it. We're in budget, we're making the payments back to you, we've never defaulted on a payment, you've got no right to operationally start to dictate how we run this football club'.
As far as the banks are concerned, they just want their money back. As far as I'm concerned I want to create a team that's competitive and can actually win so it's a balancing act between player disposals, getting rid of the fringe players that we agreed with Gianfranco but keeping the team competitive. We came under massive, massive pressure to sell Scott Parker because there was a bid, in writing, from Manchester City - and they [the bank] were saying 'sell'. So that's been the biggest issue I've had to overcome is to put the banks back in their place. You've lent us the money, we're not defaulting - now back off.
But our accounts, when they are published will show they're a disaster - but they're a historical disaster and that will show what we've had to come through to remain a going concern, to reduce our borrowings, to reduce our debt. We're through the dark tunnel now, we're on the other side and now we can move forward.
KUMB: Are we self-sufficient now, Scott?
SD: Oh completely, yeah. Next summer we are budgeted to be able to take quite a proportion of the TV money and spend it on player acquisitions whereas we have - well I've made it a sort of secret - we've had to sell players, fringe players I have identified that won't hurt the team.
Gianfranco wants a squad of 21, we had a squad of 30-odd. But I did come under pressure to sell some key players. Well, I would have gone, Gianfranco... it would have been a complete disaster. But they are the arguments we've had to have, we've done them and the banks can just get back in their place as far as Iím concerned.
KUMB: Are the banks all onside now?
SD: I still have my arguments! As far as I'm concerned we've never defaulted, we won't default and the fact that they messed up in their own banking world and they're now trying to claw money back is not my problem. So I'm comfortable they have no legal right, they have no ability to operationally become shadow directors and get involved in this football club.
But that's been my biggest challenge. They're in their place now, Straumur have taken over and the banking syndicate are there. I'm sure I'll continue to have rows with them but they're not going to force us to sell players.
KUMB: So legally speaking, as long as we are not in any ...
SD: We've never defaulted on a loan payment.
KUMB: So they can go whistle?
SD: Absolutely. You know, I found the banks to be extremely frustrating and not very supportive but they've got their own problems. They're not interested in this football club being a success which I find baffling because to me they should be. If we get relegated ... bloody Hell.
But you're sat round the table with bankers and I'm explaining we want to be competitive and we want to get into the Europa League - and they just see £7/8million for Scott Parker and say 'we want it'. Fortunately we've won every battle and that's it now. Those were the hard times, January when we had a defunct owner, we had a potential court date where the asset could go into administration, all of these rumours. But now we've got a new owner so I think the banking discussions are now over.
KUMB: On Straumur, you mentioned that they were confident they could come through the moratorium which I think has a deadline date for 6th August?
SD: I think so, I genuinely try not to get too involved in that.
KUMB: So you're very much at arms length from all that?
SD: Completely. I think if I start getting involved with that and other issues... my whole focus is West Ham United, not Straumur and I've created a business plan that's not dependent on external funding. So my decisions are always for West Ham, not for Straumur.
KUMB: What would happen though - obviously Straumur have their own problems to a certain degree and creditors - what would be the situation if we got towards the 6th and Straumur's creditors were saying 'no, we're not happy with what you're doing'?
SD: Well there are no creditors of Straumur as such because CB Holdings is Straumur and the creditors, so they are as one. They are just restructuring.
If you think about it logically it's unthinkable that anything other than a restructuring will happen. This football club is worth £120-150million, they're not just going to lose than for want of a restructuring process. The creditors are all as one voice now, they are CB Holdings.
KUMB: On slightly related matters, obviously BG's involvement ended with the Straumur restructuring and CB Holdings coming in. Up to that point we heard various tales of interested parties; were there any talks with anybody?
SD: Not as far as I am aware. I've got nothing but great respect for BG because he's always supportive, he put huge amounts of money in - okay through loans, but when the s**t hit the fan in the past year and a half he said 'Scott, just get on and run it, I'm not going to interfere'. He could have, if he was in any way malicious or personally motivated said 'Scott, sell Ashton, Green ... give me the money' - he's never ever done that. On the contrary, he's just let me get on with it and grow the team.
That's my biggest worry and why I distance myself from ownership issues. At the moment we've had two years [of it] and Straumur seem to be letting me get on with it and letting Gianfranco get on with it and not interfering. The big fear is it's sold, somebody comes in and says 'right, I don't want Gianfranco, I want this high-profile manager ... no you're not playing Collison, we're going to go and sign Kaka' - and then the wheels come off.
If you look at Newcastle, owner interference - perfect example. You look at West Ham where itís actually allowed to implement the strategic business plan without all the interference and we've flourished. But that's out of my control and that's why I try not to worry too much - because I can't control it.
KUMB: There were a number of sales last summer and in January, Craig Bellamy. One comment was that only a fraction of those sales appears to have been reinvested into the team.
SD: Absolutely. But we are now a self-sufficient football club so everything I do has to be funded from within our own income. So with regard to the player disposals, some of it was re-used on further player acquisitions like exercising the Ilunga option; the purchase of Savio. But some of it was re-routed back to reduce the debt in order to satisfy the banks, in order for us to purchase the training ground.
So the money has been used throughout the whole of the business - a proportion to reduce the debt, yes, a proportion for player acquisitions, a portion for the training ground, a portion for Gianfranco and Steve Clarke's new contracts - but it's basically just using the money from within because unfortunately - or fortunately whichever way you look at it - other than the Sky money, the main resource of income for this football club is player disposals, so we've got to use that.
We can't just take ten for this player and then spend that ten on another player - at the moment some of that money has to be used through other areas of the business. But as I say, we move to next summer and we'll have reduced our debts sufficiently and we'll have moved forward so that the majority of the money we receive from the TV deal and then player disposals will be able to be used in its entirety for player acquisitions.
But you'll see our accounts this year - they are a disaster. I'm going to keep using that word because they are. But I think that what we have to understand is that they are a historical picture of where we were and not where we are - and it just shows the hurdles that we've had to overcome.
KUMB: In financial training they call that a 'snapshot' ...
SD: It was a horrible snapshot! But we got through it and the most important thing, as you know, is that for Deloitte's to have signed us off as a going concern we've had to overcome some pretty huge hurdles. But we're there now.
KUMB: A lot of people accused Eggert Magnusson of behaving like a kid in a sweet shop with Gudmundsson's money. Do you feel that would be a fair accusation? It seems to have been a reckless period for the club in terms of spending on players like Llungberg, huge contacts for players like Lucas Neill ...
SD: I think the wages that we gave to the players meant that we had to be a Champions League club. The wage to turnover ratio was at Champions League level and I think that Nick [Igoe] did a calculation that even if we won the Champion League with the bonuses that we were giving to these players, we still wouldn't be in a profit making situation. So it was a bold player acquisition programme.
I'm not going to criticise Eggert but I think where he may have been unfortunate is that a lot of these player acquisitions were funded through bank loans - and the banking sector collapsed. That's put a huge, huge pressure on us because we've had to reduce our debt, because the banks demanded that. Had we not purchased those players financially we'd be very, very strong.
This is just a personal view and one I've implemented with Gianfranco, but that's not the way to achieve success. I think that The Project, as I call it with Gianfranco is the way to do it. You don't need to spend those kind of monies and put players on those kind of contracts to deliver success. I think that the West Ham ethos is strong and really clear, and I think we just lost it a little bit there.
KUMB: But why was it allowed to get out of hand? You have a financial background, Nick Igoe being Financial Director - were there not alarm bells ringing at the time?
SD: Yeah, but to be fair to Nick he was ostracised a little bit at the time and he flagged up several concerns. It was always made quite clear that this was an owner-led decision and the funds were available.
KUMB: So presumably if the global banking crisis hadn't occurred we could still be ...
SD: I still think it's so highly leveraged that without European Champions League football it was a mistake. Let alone the footballing consequence of having the players in the changing room. It's so easy, and I do it sometimes - you sit there and see this wonderful glitzy product on the pitch and you get a little detached - but they're just human beings like me and you and they sit round the changing room and one's driving a certain car and bragging that he's earning x per week and the other, who's a better player, playing every week and doing far more for the team is on a third of that.
It's not good team spirit and that's why we've altered the wage structure and why all of our top players are on there or thereabouts the same salary. That was the rationale behind the Lucas Neill contract - great player, but at his age and where he was... He got an Eggert Magnusson contract and so he wanted another Eggert Magnusson contract, but that doesn't happen. So we gave him a good contract, making him one of the top earners at the club but all within the same wage structure so when they all go out there, there is no jealousy, there is no rivalry - they all know they're being paid roughly the same.
The younger players are not on as much as the senior players but they know they can aspire to that. They know when they get to that level they can get that.
KUMB: So do we have a wage cap in position, as such?
SD: We don't have a wage cap, no - I'd never be that inflexible for us, but we have a clear idea of what our players should be earning, so ...
KUMB: A structure, of sorts?
SD: Put it this way - if Kaka becomes available and he needs to earn a little bit more, I'd be flexible!
KUMB: Talking of acquisitions, foreign or otherwise, Jimenez has just come in. If I can ask a technical question on how these things work? He has come in on loan. I've seen various figures bandied around but presumably that option to purchase is at a set price?
SD: Yes, the deal is with a view to a permanent transfer. We went to all the trouble with the work permit, we've been tracking him for six months. We had a barbeque at Gianfranco's house and were just talking but his whole team revolves around Jimenez. He's got Plan A and Plan B - Plan A is I'll have Jimenez there, Mancini there, Cole there, Behrami, Parker ... he said 'if that stays fit, it's Champions League!'. That is a team that he believes, if it stays fit will push on, so his whole team has been built round Jimenez.
I'll try and do every deal this way. I know Martin Samuels did this thing where he hates loans but from a cashflow perspective they're superb. But it's fantastic, it's the best way to do it. Legally binding, Ilunga is a perfect example and it's just if clubs are willing to do it it's the best way. The onus is on the player to impress.
KUMB: On the technical side again, what happens at the end of the loan period if we want to exercise our option to buy and the player decides he doesn't want to come? How does that pan out?
SD: It's like any transfer - you can't keep a player that doesn't want to be here so it would be identical to Mikel's [transfer from Man Utd to Chelsea]. They had an option and in the end Chelsea ended up paying Man United £12million - and Man United didn't even have a day where the player trained. That's what would happen.
Generally he's our player, we would exercise the option so he's on a four-year contract. If the player doesn't want to stay we're not going to force him so he'd be sold for £20-£25million or whatever we agree or what fee a compensation court says. But the thing is, and this is so clear with Gianfranco, is that it's all about personal relationships. If he wants to stay and be with Gianfranco he will do - if he doesn't Gianfranco doesn't want him, so...
Part One | Part Three