Is this the end of Portsmouth Football Club? Many fans and pundits think it could be, and this could all be down to cash flow problems.
It is reported by the BBC that due to Portsmouth’s insufficient ground capacity, the club relied heavily on TV payments to meet its monthly outgoings. When the Premier League withheld its TV payments in January 2010, the strain on the company’s cash flow was evident with players not been paid on time and management searching for new sources of finance. Accountancy Age reported that the club was looking to receive a cash injection before 17 February 2010 from an associate, but this never came. Cash flow is a key component in operating a successful business, and during a recession its importance cannot be understated.
It is reported by the BBC that due to Portsmouth’s insufficient ground capacity, the club relied heavily on TV payments to meet its monthly outgoings. When the Premier League withheld its TV payments in January 2010, the strain on the company’s cash flow was evident with players not been paid on time and management searching for new sources of finance. Accountancy Age reported that the club was looking to receive a cash injection before 17 February 2010 from an associate, but this never came. Cash flow is a key component in operating a successful business, and during a recession its importance cannot be understated.
If you are regularly unable to pay suppliers or employees, then without restructuring your business and finances, the outcome will normally be insolvency. There are various cash management strategies that can be implemented (for example, re-negotiating supplier terms or selling non-core assets) to give a company some breathing space.
In late February 2010 Pompey then became the first Premier League club to enter administration with debts of around £60million and were deducted nine points, which saw them relegated from the top flight, losing the vital TV payments.
Portsmouth FC eventually came out of administration to only slip back into it in February 2012. They once again had points deducted and have now been relegated to the third tier of English football. Going into administration twice in three years has almost killed off Portsmouth Football Club. At present, Pompey maintain an annual wage bill of £12 million and their players have recently been asked to take wage reductions in order to keep the club afloat. They are preparing to offer redundancy to many of their staff in order to cut this huge wage bill.
Read this article on the BBC website and then watch the 2 minute video at the bottom, then answer this question in the comments section:
http://www.bbc.co.uk/sport/0/football/17859429
Mr King’s Question
How has a poor cash flow position almost caused the end of Portsmouth Football Club? What factors caused their terrible cash flow position in the first place?
In late February 2010 Pompey then became the first Premier League club to enter administration with debts of around £60million and were deducted nine points, which saw them relegated from the top flight, losing the vital TV payments.
Portsmouth FC eventually came out of administration to only slip back into it in February 2012. They once again had points deducted and have now been relegated to the third tier of English football. Going into administration twice in three years has almost killed off Portsmouth Football Club. At present, Pompey maintain an annual wage bill of £12 million and their players have recently been asked to take wage reductions in order to keep the club afloat. They are preparing to offer redundancy to many of their staff in order to cut this huge wage bill.
Read this article on the BBC website and then watch the 2 minute video at the bottom, then answer this question in the comments section:
http://www.bbc.co.uk/sport/0/football/17859429
Mr King’s Question
How has a poor cash flow position almost caused the end of Portsmouth Football Club? What factors caused their terrible cash flow position in the first place?
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