You might think that chief executive Alistair Mackintosh’s biggest concern at
the moment is keeping inspirational manager Stuart Pearce from the clutches of
the Football Association as it searches for England’s next manager.
It is not. Strangely enough he is more worried about the Manchester City’s
rating in the latest Deloitte football rich list table. As the 17th highest
football revenue earner in the world for 2005 at £60m, the club is rubbing
shoulders with the likes of Real Madrid and arch rivals Manchester United. ‘If
the players get hold of the report they’ll want higher wages,’ he quips.
Behind the joke, the friendly and quietly spoken chartered accountant has
proved a steely competitor. Financially astute and determined to maintain
rigorous controls over what is widely considered the toughest financial task of
all, running a football club and making the numbers add up.
Inevitably, talk turns to the highly publicised shadow of debt hanging over
the club. For Mackintosh, the situation is one that has been carefully
considered and is a risk well understood and managed. For one thing, he believes
the debt, which amounts to around £60m, is well structured. It consists of a
£44m securitisation, formed of a £30m tranche payable over 25 years, and £14m
payable across 15 years. Most importantly, it is secured against the stadium,
which according to the balance sheet is worth £150m.
The stadium is not actually owned by Manchester City FC – but the city
council and was passed on to the club following the Commonwealth Games in 2002,
on a 250-year lease. The length of the lease effectively means it is ‘as good
as’ a freehold.
In a move described by one accountant close to the club as ‘extremely
clever’, the club pays a lease fee to the council determined by the number of
attendees per games above average, and linked to the inflation rate.
Appearing on the balance sheet as the total to be repaid calculated across
the 250 year period, the £42m figure certainly makes an impact. But on a annual
basis there is a relatively small effect on the P&L. Its 2005 year end
showed £3m in lease payments to the council.
Managed in tandem with long-term deals secured against the stadium, the club
is in better financial shape than it has been for years, despite numerous
headlines suggesting that the club is ‘saddled’ or ‘struggling’ with debt.
Last week’s interims saw the club report the benefits from the sale of Shaun
Wright-Phillips, and the business is looking very settled. But debt management
must be balanced with future investment, which, in terms of a football club,
means new players.
‘We have flexibility,’ says Mackintosh. ‘Chelsea gave us £24m (for the sale
of rising star Wright-Phillips) and the business generates significant cash.’
Yet football club owners and managers are famous for taking risks. Reports
even circulated that Mackintosh and then Manchester City chairman David
Bernstein were less than impressed by City manager Kevin Keegan’s attempts to
continue spending on players.
Mackintosh cites Leeds United’s problems – ‘they invested in top talent, at
top prices, with long contracts and a business model based on constant European
football’ – as a prime example of a club going too far.
He is set on handling risk as a matter of course, but without strangling the
club’s ambitions. ‘There are many ways for clubs to mitigate the risks they
face, such as operating flexible contracts with players. Don’t base risk on
attaining a great level of success, so you
can control the downside. Monitor wages against turnover – where you finish
in the Premiership should be reflected in wage budgets. It’s about being within
a responsibly run business, of which accountancy is at the forefront,’ he
The sale of star players often has a destabilising effect on a club. Recent
negotiations with central midfielder Joey Barton led to an outburst from the
player over the deal offered to him, and his subsequent transfer request was
turned down. ‘It’s a natural part of negotiations,’ Mackintosh says
philosophically, ‘but generally we don’t like to negotiate through Sky TV’.
His attempt to duck the limelight of Sky Sports is refreshing, especially
with broadcasters eager to fill the airwaves with soundbites and comments from
‘football personalities’ such as Portsmouth chairman Milan Mandaric and
Chelsea’s chief executive Peter Kenyon.
In fact, Mackintosh’s contributions have been limited to a few short
interviews with the local newsmedia. And this despite handling the club’s move
from old stadium Maine Road into the City of Manchester stadium.
A year after the Commonwealth Games ended, he took responsibility for the
project management of a £20m makeover that transformed the stadium into one
ready to handle football crowds week in week out, having negotiated the
‘transfer’ in the first instance.
‘I had daily tasks, cost-benefit analysis on every aspect of the stadium –
it’s no problem finding designers to design anything, but the issue comes down
to cost value engineering.’ Mackintosh feels his accountancy background held him
in excellent stead for the task, describing it as ‘invaluable’ at times. ‘It’s
about what you learn in an audit – teamwork, management, preparation, hard work
As an accountant at the top of his game, Mackintosh has taken a classic route
to get where he is today. Trained at Price Waterhouse, he spent his time in
practice working across audit and corporate recovery, including secondments at
IBM and Shell. ‘Working at a football club felt new, but my background helped,’
He began at Man City as financial controller and then moved up to the FD
role, Mackintosh now hopes his time managing the stadium’s transition won’t be
wasted as far as the 2012 Olympics is concerned – although he says he’s not
after an executive role.
‘I get on well with Sport England CEO Roger Draper (who quit to join the LTA
two weeks ago), and the club has a strong relationship with the public and
private sector, in terms of carrying on the Games’ legacy of regeneration in the
Even with his declaration of love for his current role, perhaps Man City fans
should worry more about losing Mackintosh to Sport England, than Stuart Pearce
to the FA.
Mackintosh has plenty of ideas about how to better handle the books of
football clubs. In particular, he highlights realistic wage structures, which
can be altered depending on the club’s success.
He also suggests that keeping tabs on the wage/turnover ratio is a key
indicator of whether finances have got out of control.
But NickHumby,group FD of rival club Manchester United, argues that
wages/turnover as a control mechanism is ‘fraught with problems’. He says that
this does not enable analysts to make valid judgments or comparisons unless they
understand the different revenue recognition each club adopts.
But Humby agrees with Mackintosh’s decision to have a variable element to
wages and contracts that are flexible depending on performance on the pitch.
Paul Stanley, managing partner for the Northern offices of corporate recovery
firm Begbies Traynor, believes there are more fundamental issues facing clubs
and their financial management.
‘When a scrap metal merchant or wheeler dealer comes into money and takes
over a football club, that person thinks they have hit the bigtime,’ explains
Stanley. ‘Any economic rules they’ve followed in the past to get them where they
are, go out of the window.’
Stanley argues that unrealistic expectations are the downfall of many teams,
such as eight clubs making big money transfer gambles when there are only three
promotion spots to be filled.
Some chairmen have made money by taking risks, Stanley adds, ‘but that
doesn’t make them King Midas’.
‘They’re not used to having good controls people around them.’