In profit for the first time in five years, and set to build the new National Stadium, a fitter Wembley looks to have found its form again.
In November 1995, when Wembley plc put in a bid for £120 million of Lottery money to transform the group's world famous but dilapidated North London complex into the new English National Stadium, many people believed the bid could not fail. The self-styled Venue of Legends could, after all, justifiably claim a special place in the hearts of all English sports fans.
The story started way back in 1923 when the then new stadium hosted the first FA Cup final and George V, joined by 200,000 fellow supporters, looked on as Bolton Wanderers beat West Ham 2-0. Later, in 1948, Wembley hosted the Olympics, and it was there too that in 1963 'Our 'enry' Cooper knocked down the seemingly invincible Cassius Clay (subsequently saved by the bell). The stadium's crowning moment came with the hosting of the World Cup final in 1966 when Bobby Moore captained England to victory against old rivals Germany.
So, with competition for the Lottery money coming mainly from Manchester, clearly Wembley, given its long and illustrious history, would receive the enthusiastic backing of all Londoners. Not quite. When Tony Banks, the excitable Labour MP for Newham North West (now minister for sport) learned of the bid, his thoughts were expressed with his usual restraint.
'I don't like the idea of taking a bloody great white elephant off people's hands, because that's what we would be doing and it's an absolute scandal.
We're being asked to revamp a clapped-out old stadium and hand over a lucrative contract to a management team that couldn't run a whelk stall.'
Banks was not alone in his opposition to the bid. While Wembley's management may at a push have been able to manage a whelk stall, its abysmal financial track record hardly inspired confidence. During the 1980s under Sir Brian Wolfson, the group had embarked on an acquisitive - and ultimately disastrous - spending spree. If it moved, Wembley bought it. By 1994, in addition to the core divisions of the stadium and several greyhound racing tracks, the company found itself with a clutch of underperforming nightclubs, shopfitters, discos and bingo halls. A huge share issue had effectively wiped out the value of many individual shareholdings - at one stage there were a staggering 5.5 billion shares in issue, about 70,000 for every seat in the stadium - and put Wembley into the record books for issuing more shares than any other organisation in the history of the City. As the recession bit, the group found itself with £150 million of unserviceable debt and it was only thanks to its bankers that it was able to continue trading.
In late 1994, Charterhouse, one of the creditors, decided it was time for some new blood. The bank approached Claes Hultman, then chief executive of Eurotherm, and asked him if he was willing to join Wembley's board as a non-executive director. Hultman, an ebullient Swede, fluent in five languages and a mechanical engineer by training, had a formidable track record. Eurotherm was his first experience in a quoted company. In the five years he had been there, profits had surged from £7 million to over £34 million. It was his eighth turnaround and Charterhouse wanted Wembley to be his ninth. Hultman, however, dismissed the offer out of hand. 'Without power I wouldn't have been able to perform,' he explains now. 'At that time Wembley was in serious danger of going bust and the last thing I wanted on my CV was a bankruptcy.' Charterhouse had a rethink and called him back a few weeks later with the offer of the chairmanship. Hultman considered the proposition for a few moments: this was more like it.
'One of the first things I did was to wander around the Wembley complex,' Hultman recalls. 'And what struck me was how many extraordinarily good people we had on the staff. This was amazing considering the losses the company had incurred. All they had been lacking was clear direction. If I could provide that direction, I knew they would perform.'
Under Alan Coppin and Nigel Potter, then managing director and finance director respectively, Wembley had already begun to restructure. Between them, they had disposed of a bingo operation, Lion Leisure, and The Needles Leisure Park on the Isle of Wight. A former senior management consultant in the leisure and tourism group at what is now the accountancy firm KPMG, Coppin had been a member of the Wembley board since 1988. Potter, who had been director of finance (Caribbean) for Cable & Wireless, joined him on the board in 1992. When Hultman arrived in early 1995 the new top management team was complete and Coppin was promoted to chief executive.
In the conservatory of Hultman's house overlooking Wentworth golf course the three sat down and drew up a 52-point plan of action.
Back to Basics has been the driving philosophy over the past four years and the group now comprises four core businesses - the Wembley Complex itself, United Track Racing (UTR) in America, the UK greyhound track division GRA, and Keith Prowse hospitality. 'What Claes did so well was to give us all a strong focus,' says Potter. 'We already felt that we were on the right track but Claes really gelled our thoughts and made sure that we were all pulling in the same direction.' By the summer of 1995, the balance sheet had been restructured via a £62.5 million rights issue and a £53.7 million debt-for-equity swap, and gearing had been reduced from a staggering 324% to 49%. There was still a long way to go to convince the Sports Council that Wembley could be trusted to run the National Stadium but the powers that be were at least beginning to take note.
Hultman, in fact, had attracted some flak in the press for his oft-quoted dislike of competitive sport. How, people asked, can we have a Wembley chairman who doesn't even like football?
There is a glint in Hultman's bright blue eyes as he responds to the accusation and one senses that he rather enjoys the apparent contradiction. He says, in his Scandinavian accent with its lingering treatment of vowels, 'I like to turn companies around which are underperforming. We all have our interests in life and that's mine. It's a sport in itself.'
Hultman's style is very much hands-off. His contract at Eurotherm, where he is still chief executive, allows him two days a month to concentrate on Wembley and he sees his job simply as running the board while Coppin gets on with running the company. 'It's crucial that those two roles are separated,' he stresses. The strategy is strong, centralised financial control, with operating power being pushed as far down the management structure as possible.
'When I arrived, the whole management structure was very woolly. Indeed, I'm not even sure there was a management structure,' Hultman says. 'No one was quite sure what the board expected of them or who they were ultimately accountable to. Perhaps what I did most was to define clearly what we did expect of them. The problem, I think, was that the heads of the individual businesses - the greyhound tracks or the arena, for example - were not empowered to make any changes. What I did was give them that power. I said simply: "You are the boss, you call the shots. You are totally responsible for your department and you can run it as if it were your own business".'
Hultman cites the recent refit of the Wimbledon greyhound racing stadium as perhaps the best example of how his philosophy has improved things.
'The press always bangs on about cost-cutting,' he says, 'but cost-cutting is not what turns businesses around. What turns businesses around is making the product more attractive to the customer.' The benefits of the massive upgrade at Wimbledon - including the installation of satellite betting and upgraded executive suites - are already being seen. 'These ideas certainly didn't come from me,' Hultman says with a perverse sort of pride. 'They came from the local management who had a vision of how to enhance value; that's what I mean when I talk about empowerment and it is as a result of this sort of delegation that we have managed to squeeze so much more out of the surviving core divisions.
'My job is simply to set targets and budgets and then let everyone else get on with what they do best,' he continues. 'Some people seem to think it's outrageous to set performance goals but it seems perfectly reasonable to me. You must aim to beat the cost of capital otherwise you'll end up destroying value - value that other people have worked hard to build up.
I haven't got a clue how to run a stadium or how to price the gaming operations in the States, but what I do bring, I think, is some focus to the board.' Internal budgets are not disclosed, but the rule of thumb is for a minimum 15% return on any new investment (10% after tax). It is difficult to apply the same criteria to existing assets because it depends on the basis of valuation, but Hultman is renowned for making assets sweat for their living.
The strategy certainly seems to be working. Wembley, for so long the disappointment in the leisure industry, bounced back into the black for the first time in five years last summer - helped, in part, by revenues from Euro '96 and by disposals such as the furniture hire business Jongor, and Pacer CATS, a provider of computerised cinema admission systems. The good news continued in December when, following the company's return to financial form and endorsements by the football, athletics and rugby league authorities, the Sports Council chose Wembley as the preferred location for the new National Stadium. In February of this year, the group announced record full-year results, with operating profits up 140% to £27.2 million. Earnings per share were 24.6p, up from a loss of 16.5p per share. Gearing has been further reduced to under 27% and the company returned to the dividend list for the first time since 1992, paying out 2p per share.
The Wembley Complex and UTR in the US account for roughly half of the group's improved profits total each. The complex showed a 54% profit increase in 1996 to £14.1 million, with the eponymous stadium hosting numerous big-name pop concerts and six football matches during Euro '96. Keith Prowse also profited from Euro '96, and from increased sales of hospitality packages at top tennis, golf and racing championships.
In America, UTR (which manages three greyhound tracks and a horse racing venue in Colorado and Rhode Island) had its most profitable year to date.
By contrast, profits from the UK greyhound division, which runs six tracks, were almost flat at £2.6 million. That stagnation is partly a reflection of the refurbishment at the Wimbledon venue, but by a strange twist of irony, the division's profits have also been hit by increased sales of National Lottery tickets.
At the announcement of the 1996 results, the chemistry between Hultman, Coppin and Potter was evident - a camaraderie forged from shared adversity.
'Trying to run a business when your name is in the financial pages every day - and not mentioned in a particularly positive light - while also trying to keep the creditors from the door, was not very pleasant,' says Coppin. 'The experience has made us into a very tightly-knit team and that can only stand us in good stead for the future.'
After the disastrous mistakes of the past, that future - for the short term at least - is likely to be one of consolidation. Although the group is again generating cash, any mention of a return to the acquisition trail is treated with caution, and Coppin cites recent research which appears to show that 60%-70% of all corporate acquisitions end in failure. Having had its fingers burnt in the past, the board will be eager to go after only those companies to which they can genuinely add value. Madame Tussaud's, which attracts two million visitors a year and would sit nicely with Wembley's experience of managing large visitor attractions, has been touted as a possible buy although Coppin is insistent that Tussaud's is already very well run. Rumours of a dedicated Wembley television channel showing re-runs of concerts and sporting events appear also to be overdone.
In the meantime, several issues remain to be resolved before Wembley formally applies for the £120 million of Lottery money later this year.
An architect has still to be appointed, for example, and the total cost of refurbishing or rebuilding the new stadium - likely to amount to over £200 million - leaves questions marks over how the shortfall will be made up. In addition, under the good causes grant distribution rules, it is forbidden for private companies to benefit from Lottery money. The current plan being mooted is for a trust, run by various sporting bodies, which would take control of the ground and then lease it back to Wembley. In return, Wembley would be guaranteed a long-term management contract.
These, however, are mere details and, for the foreseeable future, the group's financial health looks secured. Only two years ago, Wembley, like many of the events it has hosted, was in danger of being relegated to the history books. The new management team has accomplished much of what it set out to achieve; news of the group's revival has already begun to spread and Wembley has been contracted to advise the French authorities on hosting the 1998 World Cup. The group is also part of a consortium bidding to run the Sydney Olympics in 2000.
The jewel in the group's crown, however, is still the stadium at Wembley and, under an agreement with the Football Association, it will host the FA Cup final and all international matches until 2002. In addition, the group has contracted with the Rugby League to stage the Challenge Cup up to the year 2002, and plans are already in hand for London to bid to host the 2001 World Athletics Championships and the 2006 World Cup. Known as an avid football supporter, it will be interesting to see whether the (presumably) bright red face of Tony Banks will be spotted among the cheering, scarf-waving crowds.