Football finance FC..ked

Premier League: 5 years from 2003 to 2008

• Matchday income up 53% from £363m to £554m

• Total income up 55% from £1,246m to £1,936m

• Borrowing up 276% from £825m to £3,106m

• Shareholder funds down 248% +£297m to -£442m

WHERE HAS ALL THE MONEY GONE?

Buy buy United Guardian headlines say it all!• Manchester United's sales pitch is far from a premium bond

(13 Jan)

• Success for Manchester United as Glazers raise £504m from bond issue (22 Jan)

• Red Knights confirm plans for Manchester United bid (2 Mar)

• Glazer family reject secret £1.5bn offer for control of Manchester United (6 May)

• Fury of Old Trafford faithful not enough to force boardroom to sell up (20 May)

• Red Knights shelve plans (2 Jun)

Community Shares ProgrammeTwo-year action research programme funded by Office of Civil Society and Department of Communities and Local Government, delivered in partnership by Development Trusts Association and Co-operatives UK

Working with 10 organisations raising community investment:• Ashington Minors – childcare nursery• Cybermoor – rural broadband services• Brixton Green – community land trust and urban regeneration• FC United of Manchester – building new stadium• Hastings Pier & white Rock Trust – development trust • Hurst Green Village Shop & Centre • Oxford Cycle Workshop Training • Sheffield Renewables – urban renewable energy schemes• Slaithwaite Co-operative – community-owned greengrocers• Tutbury Hydro Electric Project

Financing community ventures

• Grants, gifts and donations are best because they are free, but how much free money is (will be) available for community enterprise?

• Loans and bond finance is readily available from institutions and (to a lesser extent) individuals, but commit the venture to generating a fixed amount of profit to pay interest and refund capital, and can be short-term

• Equity investment through community shares, is more flexible, longer term, and connects the investor to the enterprise, sharing in the risks and rewards

Community shares summary• Defined as community enterprises with more than 20

members with combined investment of more than £10,000

• Oldest surviving example is Lincolnshire Co-operative Society est. 1861: 161,000 members £9.6m shares.

• Currently 141 enterprises fit this definition, 40% of which have been established in the last 30 months

• Combined community investment of over £300m and combined membership of nearly 6m.

• In last ten years total community investment of £30.5m from combined membership of 60,000

Community shares by trade activity

Trade activity Number orgns. Share capital Members

Renewable energy 28 32,191,000 11,687

Regeneration, land and buildings 22 13,516,000 2,947

Consumer co-operatives 19 182,455,000 5,843,000

Community retail stores 18 571,000 2,561

Transport (inc historic railways) 18 20,809,000 n/a

Finance and investment 10 7,489,000 1,858

Food production and farming 6 886,000 9,539

Fair trade products 5 33,409,000 18,705

Pubs and breweries 5 575,000 388

Football 4 1,231,000 31,704

Other 6 8,849,000 39,084

Growth in community share offers

2009 IPS community share offersShare

capital £No. of

memberAv. £ per member

The Cochabamba Project 623,003 89 7,000

Sustainable Hockerton 167,550 41 4,100

Ecological Land Co-operative 123,000 38 3,200

Hudswell Community Pub 219,100 151 1,450

Sheffield Renewables 12,050 12 1,000

Go! Co-operative 58,006 70 830

Busy Bee Toyshop Co-operative 32,250 102 300

Fairtraders Co-operative 85,000 370 230

Slaithwaite Co-operative 15,000 121 120

Dunbar Community Bakery 23,000 230 100

Football and community shares

Name Legal format

Share capital

No. of members

Year Est.

AFC Wimbledon plc £1.2m?? 2,500 2003

FC United of Manchester ips £2,093 2,093 2005

My Footballclub Society ips £9,055 9,055 2007

Eastbourne Borough FC cic cls ?? ?? 2008

Stenhousemuir FC cic cls ?? ?? 2009

Why is IPS the preferred format?

Unique attributes of IPS share capital:• Withdrawable share capital• One-member-one-vote• Upper limit on investment• Flexible cap on financial returns• Dividends on transactions, as well as interest on

share capital• Optional statutory asset lock• Exempt from regulation

Community shares: key elements

CommunityShares

Attracting and engaging members

Member

Supporter

Viewer

Audience

Director

Activist

CustomerVolunteer

Investor

Service user

Worker

Supplier???

How members strengthen the business model

Members roles How these roles strengthen the business model

Investor Lower cost of capital; greater acceptance of risk

Customer Greater loyalty; accept higher prices & dividend

Service user Demonstrates support to funders; better feedback

Activist More engagement; better feedback; better targeting

Volunteer Lower labour costs; access to specialist skills

Suppliers Greater loyalty; lower input prices

Workers Greater loyalty; lower input prices; better feedback

Directors Access to specialist skills; lower input prices

ShareLiverpool FC

• IPS established 2008• Aims to lead community buy-out of LFC• 35,000 registered supporters pledged £40m• Shares cost £500 each• Aims to raise

– £11m member share capital– £140m member loans– £100m commercial investors– £100m bank loans

• Website says there are 4m LFC fans in UK & Ireland

Conservative manifesto 2010

“Our new ‘community right to buy’ scheme will give local people the power to protect any community assets that are threatened with closure. In addition, we will:

..reform the governance arrangements in football to enable co-operative ownership models to be established by supporters.”

Further information

Community Shares website: www.communityshares.org.uk Publications• Community Investment using IPS legislation• The Community Shares Programme: One Year On • Guide to governance and offer documents (July 2010)• An investor’s guide to community shares (July 2010)• A practitioner’s guide to community shares (Mar 2011)Further contact:www.bakerbrown.co.uk Jim.brown@bakerbrown.co.uk