Kop Holdings – the firm through which American businessmen Tom Hicks and George Gillett own Liverpool – posted a £41m pre-tax loss for 2008. That’s despite a 60% rise in TV revenues fore the year and an operating profit for the club itself of £10m.
So what’s gone wrong? In a word, leverage. The loss was largely due to interest payments of £36.5m on Kop Holding’s and Liverpool FC’s combined debts of £359m, up £77.5m from last year. It looks like the club has simply been spending more than it can really afford on players and design work for the planned new stadium at Anfield.
The news is hardly likely to endear messrs Hicks and Gillett to some Reds supporters, many of whom have long harboured resentment at the way the pair run the club – despite on-field successes.
But perhaps the worst news of all is to be found in a statement from the club’s accountants KPMG, which voices concern that Liverpool may struggle to continue as a going concern. This is because their existing £350m loan facility, although only fairly recently renegotiated (hence that interest charge), expires on 24th July. If ongoing negotiations fail to secure an extension of that facility, things could turn nasty for the club in pretty short order.
It all goes to show that football and business can make tricky bedfellows. Liverpool finished second in the Premiership, only four points adrift of Manchester United and ahead of Chelsea, but it’s starting to look alarmingly as though the club has bought its success on tick and may now struggle to pay the bills.
If it were a normal firm, the directors would now be going over the books with a microscope, cutting back all non-essential spending and flogging off surplus or non-core assets. But this is football, where the usual fiscal rules simply don’t seem to apply…