Debt is the single most problematic issue facing football today. Or so you may think if you read the sports & finance pages. The media and strident fans groups work themselves into a frenzy of indignation while those clubs with aspirations of playing in European competitions rush to comply with the latest UEFA Financial Fair Play regulations. These stories make good copy but they do so on a false premise. Debt is not necessarily a bad thing. Most commercial organisations can’t operate and grow without it. The key question to be answered when assessing the long term viability of a sports club is not how much debt is carried on the balance sheet, but:-

• – what is the reason for, or purpose of the debt; and more importantly,
• – what cash resources are available to service it

Compare the recent positions of Portsmouth FC and Manchester United. Last season, Portsmouth borrowed over £60m just to pay the salaries of players who otherwise could not have been added to the team. In the case of Manchester United, the club can accommodate their wage bill as a reasonable percentage of their growing revenues. The key to both situations is cash-flow. That is, whether there is enough cash generated through sustainable business activity to service the debt.

Another point conveniently forgotten by fans and pundits alike is that clubs who swap their debt-free PLC status for heavily leveraged buy-outs are simply exchanging one cost for another. The cost of operating as a PLC with dividends paid to shareholders, the need to employ city bankers, lawyers and PR firms to run their AGMs together can equate to the size of interest payments on the debt.

So what should sports clubs do to make sure they don’t fall into the debt trap? They should follow the advice of their grannies and not gamble on future success or spend more than they earn. Specifically, they should set a reasonable ratio of players’ wages as a proportion of club revenue (50% seems a reasonable figure) and manage within that budget. “But if we do that, we won’t be able to compete in our league”, chant the recalcitrant chairmen. Again, the answer is simple. Increase your revenue. Not every club has a global fan base to exploit, but then again how many clubs can claim to have genuinely worked their local fan base to its full potential?

There are several key revenue generating opportunities outside of the traditional ticket and hospitality activity. These are:-

– sponsorship activation – many clubs have sponsors, but how many work with them in a true spirit of partnership to ensure that both sides get real added value from the relationship? This approach will reap rewards at renewal time.

• – affinity marketing – most football clubs offer a branded credit card but how many really understand the key profit drivers of acquisition cost, cross-sell and retention. These can be leveraged to deliver incremental revenue.
• – CRM – well-managed customer data has a value. This can be unlocked through attracting more lucrative sponsorship opportunities or by using it sensibly to promote products and services to fans in a timely manner.
• – membership and loyalty programmes – most clubs pay lip-service to loyalty and their fans resent being taken for granted. A well executed membership and loyalty programme can help solve both problems.

Steven Falk’s

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With the death, at 82, of Julio Humberto Grondona, FIFA has lost its senior vice-president and finance chairman, Argentina has lost its long-serving football federation president . . . and the world federation has lost its most resistant opponent of reform.

‘Don Julio’ was not nicknamed the ‘Godfather’ of world football without reason.

He had headed the Argentinian game – both the football and commercial sectors – for the past 35 years. Reports from Buenos Aires said he died in the Mitre hospital after being admitted for emergency heart surgery.

He was a man and an administrator of his era, having come to power under the military dictatorship. Parliamentary democracy may have returned to Argentina but Grondona’s leadership style and attitudes remained rooted in the autocratic era which empowered him.

He had no time for critics, rivals (of whom there were fewer and fewer down the years), journalists or even his own country’s succession of political leaders; as entrenched president of the AFA he had no need to care for such people.

Dictatorial style

Yet for all the criticism which rained in on Grondona and his dictatorial style it must also be said that he was never caught – as were Brazilians Joao Havelange and Ricardo Teixeira, for example – with his fingers in the world football till.

Also, no accusations of corruption ever threatened him as they did the likes of Jack Warner and Mohamed bin Hammam.

Grondona was there before them and he remained in place and immovable long after they had all departed in disgrace.

However, even Grondona had signalled that his formal control of the levers of power was coming to an end.

He was re-elected in January last year as AFA president but, having lost his wife as well as younger brother and close aide Hector in the previous 12 months, had announced an intention to retire in 2015.

Grondona was born in Avellaneda, Buenos Aires, on September 18, 1931. In 1956 he was a founder member of the Arsenal club of Sarandi which served as his initial power base as its president from 1957 to 1976. He was then president for three years of world and South American champions Independiente.

In 1979 Grondona was handpicked to head the AFA by Carlos Lacoste, the army strongman who had headed the organisation in 1978 of the World Cup finals which Argentina had won. He became a member of the FIFA executive committee in 1988.

Under Grondona’s leadership Argentina won the World Cup in 1986, finished runners-up twice – most recently earlier this month in Brazil – five world youth cups and Olympic Games gold in both 2004 and 2008.

Acting president

Julio Segura, senior vice-president of the AFA and chairman of Argentinos Juniors, has taken over as acting president . . . on the day Alejandro Sabella had been expected to confirm his resignation as national team coach following the runners-up finish at the World Cup.

The start of the new Argentinian season, scheduled for this coming weekend, is expected to be postponed.

FIFA president Sepp Blatter, in tribute, said: “I feel a great personal sense of loss, because he was a lifelong friend. But it is also a huge blow for FIFA as an organisation, as he was one of its key figures. On behalf of FIFA, I would like to extend our sincere condolences to Julio’s family.”

Grondona, as finance chairman of FIFA, was happy with the revenue results which accrued from the politically controversial decision to run bidding for the 2018 and 2022 World Cup simultaneously.

He was no friend of British football for reasons deriving from both his close ties to the military junta of the 1970s and the early 1980s and the outcome of the reckless Falkands/Malvinas ‘adventure.’ Probably the only feature of the FIFA reform process of which he approved was the removal of the British vice-presidency.

Reform leader Mark Pieth made little secret of the obstructive behaviour of the Spanish-language clique within the exco where Grondona formed a formidable liaison with Spanish federation president Angel Maria Villar.

This led, early this year, to a failed attempt within the exco to scrap the ethics investigation into the 2018/2022 World Cup bids.

Keir Radnedge has been covering football worldwide for more than 40 years, writing 33 books, from tournament guides to comprehensive encyclopedias, aimed at all ages.

His journalism career included The Daily Mail for 20 years as well as The Guardian and other national newspapers and magazines in the UK and around the world. He is a former editor, and remains a lead columnist, with World Soccer, generally recognised as the premier English language magazine on global football.

In addition to his writing, Keir has been a regular analyst for BBC radio and television, Sky Sports, Sky News, Aljazeera and CNN.

Keir Radnedge’s Twitter: @KeirRadnedge

Keir Radnedge’s 

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By Ismail Uddin

iSportconnect spoke exclusively to Sepang International Circuit CEO Razlan Razali about this year’s race including the troubling news about the lost airplane MH370 and how that has affected preparations.

How are preparations going for this year’s F1 race?

Preparations are well underway. Formula 1 cars and equipment have arrived. Formula 1 has already started setting up in certain areas.

How many tickets have you sold?

We are targeting 90,000 tickets by Sunday. We have sold slightly more than 60% so far. Up until the race weekend we expect more interest, traditionally locals buy more near the end.

Malaysia has recently been hit with the tragedy of a lost airplane. Do you feel the attention of the public to this recent tragedy deflect away from the upcoming race?

Off course the MH370 incident is getting a lot of attention obviously. It has affected mainly Malaysians as it involves our national Airline. It is an unprecedented situation so it may distract people from Formula 1 and buying tickets as well it should be. In some ways it does affect the current excitement about the GP and distract them from attending Formula 1 at this moment. But we will wait and see close to the race whether there are any changes or not.

Was there any point where you considered postponing or cancelling the event due to this crisis?

No I think that was not an option. The race will go on. There was no indication from Formula 1 and neither did we request for the round to be postponed or rescheduled.

The month of March is a very busy month for Malaysia in terms of tourism activities. This year is visit Malaysia year 2013 and in conjunction with Formula 1 as one of the main attractions for Visit Malaysia year, there have been a lot of events planned around F1 so it’s very very difficult to postpone it. The show must go on.

What is Sepang’s future with Formula 1? Is there a long term future with the sport?

Our contract ends 2015 next year. We will in some ways discuss the way forward this weekend but we do have some time to decide whether we want to continue beyond 2015 or not.

What other Motorsport series do you host? Is there any new series that will come to the circuit?

Besides F1 and MotoGP, we just confirmed for the first time since the 1993, the World Superbike championship which will take place on the 6^th to 8^th June. This is an additional international event that we are hosting because the interest for two wheels is growing. It’s getting bigger and bigger.

In terms of other events, this all depends on the reception we get in the local markets because any successful motorsport event has to be attended by massive spectators. We feel that because of the interest in two wheels we can afford to have bike events. When it comes to four wheels we have to do our research to see if we can attract the masses or not, so far we have not identified any car events besides F1 for Sepang.

What’s the Current Financial Health of Sepang?

Our track is more or less utilised 96% during the year including international events like F1, Moto GP and World Superbike.

We are self-sustainable. We are looking at long-term master plan of the circuit which includes light industrial growth.   We hope to launch our hotel in about 16 months. But in terms of sustainability we are doing very good at the moment. There is a lot of interest in Motorsport and a lot of interest for non-motorsport events so we are very pleased with that.

Tan Sri Dato’ Seri. Ahmad Razlan bin Ahmad Razali serves as Chief Executive Officer of Sepang International Circuit. Tan Sri Dato’ Seri. He has been in that position since 2008.

Bin Ahmad Razali serves as Acting Chief Executive Officer of Malaysian Association of Motorsports. He served as Senior Manager of Business Development, Vice President and Head of the Internal Audit Division of BKCB from 1997 to 2000.

Tan Sri Dato’ Seri. Bin Ahmad Razali began his accounting profession in 1994 with Price Waterhouse, where he was involved in corporate finance related work.

He served as the Managing Director of Artic Building and Civil Engineering Sdn Bhd since 1997. From 1997 to 2004, he was involved in the construction, property development and information technology industry.

From 2005 to 2008, he was actively involved in the event promotion management, motor sports management and publishing.