Dear Supporter
With the current press speculation surrounding our Club I would like to explain the steps we have taken to ensure our future financial viability and why those steps were necessary.
During the forthcoming season the Club will have to repay £8m of loans to its banks and our income will be reduced by £20m following relegation from The Premier League. As a result we had to find £28m in cost savings and transfer fees in order to avoid very serious financial consequences. We have found that sum by reducing the wage cost of the playing squad by £10m and, as is now fairly well known, raising £18m net in the transfer market.
Those who say we should have shown more ambition and kept the whole squad together (with £30m at stake if we are promoted) need to understand that by November we would have run out of cash and any cheques drawn by the Club after that time would have bounced (including wage cheques).
I have been told by supporters that I should have been more open with them and explained to the whole football world that we were running out of cash and needed to raise £20m in what was a non-existent transfer market (prior to the arrival of Roman Abramovich in July). Had I done so my former colleagues in The Premier League would have 'smelt blood in the water' and the financial consequences do not bear thinking about.
We would have acted in the same way, so I am not complaining, but prior to the sale of Glen Johnson to Chelsea I received several calls offering, for example, £500,000 for Trevor Sinclair, £1.5m for Jermain Defoe and Glen respectively and even £2m for Joe Cole on the basis that we could then "save the wages". I was sorry to see Glen leave but the £6m received from Chelsea was the turning point in our current financial fortunes and I received no further frivolous telephone calls after Glen signed for Chelsea.
I am also told our problems have been caused by financial mismanagement but this is simply not the case. On 11th May 2003 our income was suddenly reduced by £20m per annum. No small business in the World could sustain such a blow without embarking upon a major financial reconstruction (bearing in mind we had the 7th highest wage bill in The Premier League in the 2001/2 season) and that is what has taken place at West Ham United - both on and off the pitch. The only real issue is whether the Board were best placed to carry out that financial reconstruction or whether an Administrator would have been better placed to do so.
I know some fans would like to see the Club placed into administration. Indeed, two of the clubs relegated last season were but our position is very different. The two clubs had large unsecured liabilities, including sums due to builders and unsecured loans in respect of transfer fees. We do not have a large number of unsecured creditors but one large creditor secured by extremely valuable freehold land and, had the Administrator failed to sell our players for the amount outstanding, we might have been forced to ground share elsewhere and see our stadium redeveloped as a retail unit or for residential use.
One other issue relating to administration seems to be overlooked by those who believe it is a good idea to run up debts and then extinguish those debts by reducing unsecured liabilities by 80%/90% or whatever can be agreed. Many of our suppliers are small businessmen who have supplied the Club, in some cases, for decades. Those businesses and their employees (often West Ham United supporters) trust us to pay our bills and could be put out of business if we walked away from our liabilities. We are, possibly, the most important institution in East London and Essex. We could not expect to retain that status if we "knocked" our local community in such a way. In modern day parlance that is not how "brands" are built nor, indeed, maintained and enhanced.
Before we all become fully submerged in the doom and gloom currently surrounding West Ham United, may I remind you of some good news relating to the Club:
1. We are now in a sound financial position and have delivered
everything we promised our banks.
2. Even after all the cut backs we can still afford a player wage
bill of £17m per annum (compared with £3-4m per annum for
some of the teams we will be playing in the First Division of the
Nationwide League).
3. We have no need to sell any more players for financial reasons
and that includes Jermain.
4. We will be bringing in new players in the near future.
5. We have not reduced our expenditure on The Academy, which
remains in good shape. I expect further young players to emerge
towards the end of the season and our Under-16s are one of the best
crop of youngsters we have had at the Club since I became Chairman
in 1992.
6. Contrary to press reports we have not sought to defer any part
of the players' salaries nor have we reduced the salary of any
individual player.
7. In the case of both Joe and Glen the Club has negotiated 25%
"sell on" fees in respect of any further transfers by
Chelsea.
Whilst writing I need to explain why we sold Joe Cole and why we would have sold him even had we retained our place in The Premier League.
During the last 18 months we had discussions with Joe and his father, in an attempt to persuade Joe to extend his contract beyond the summer of 2004. Had financial terms been the issue I am sure we would have reached an agreement but, unfortunately, Joe wanted to play Champions League football and felt his future lay elsewhere.
His preferred route was to fight to keep us in The Premier League and then leave to join a team playing in the Champions' League, ensuring his place in the England Euro 2004 squad and delivering a large cheque for us along the way to assist with the team building which we would have undertaken had we retained our Premiership status. His alternative route was to see out his contract and leave at the end of the current season under the Bosman rules. Under those circumstances Joe was free to commence negotiations with foreign clubs on 1st January 2004 (five months' time).
We could not afford to find ourselves in a Sol Campbell or Lee Bowyer situation and, therefore, had to accept an offer during the close season. No club in the Nationwide League, and few in The Premier League, can invest nearly £8m in the services of a player, no matter how talented, to play a maximum of 46 League games (at a cost of around £200,000 per game).
I do hope nothing I have said will reflect badly upon Joe. I have known him since he was 11 years old and he is a smashing lad, possibly the best all round product of The Academy in my time as Chairman. He has a great deal of affection for the Club and I would not be in the least surprised if, one day, we see him back in our claret and blue shirt.
Had we remained in The Premier League we would have made substantial profits and, with the wage bill reduced by £8m per annum, would have been in an excellent position to strengthen the squad and move forward. Sadly the season did not work out in the way we would all have wished but the time has now come to stop looking back at what might have been and to start looking forward.
We are a Nationwide League team with two tasks on hand. Firstly, to sort out our finances, secondly, to return to The Premier League.
The first task has been successfully completed (with the fantastic help of nearly 18,000 season ticket holders who have shown a commitment to the Club that no one could have anticipated and for which I am enormously grateful). Now is the time for everyone to get behind the team and the manager. We have young boys emerging from The Academy with more to follow and new signings with, again, more to follow.
None of those players can be blamed for our relegation and, the young ones especially, need your support. The Boleyn Ground can be an intimidating place for visiting teams but that intimidation can also work against our own players when we are not playing well. According to the Oxford Dictionary a "supporter" is someone who "sides with, backs up and assists a person and keeps him from failing or giving way". I know everyone is bitterly disappointed to find the team in the Nationwide League but if we can transfer the fantastic support we had at Preston to Upton Park then we will indeed have every chance of achieving our second task by the end of the season.
Finally, returning to our financial position. On 20th February Mick Dennis wrote an article in the Daily Mirror with the headline: "Why I'll be cheering if West Ham are relegated and plunged into financial ruin". What was an excellent article concluded by saying: "When West Bromwich play West Ham on Sunday some of us neutrals will be cheering for the Baggies. We want teams who go up from the First Division to be more than just cannon fodder in the Premiership and we want a big club like West Ham to go down and face ruin. Nothing personal, you understand. It's just that the rest of the Premiership must be made to realise: That could be you next."
We did not take the article personally and I am pleased to tell Mick that he will have to look elsewhere for his example but it was indeed a close run thing.
I do hope my comments have been helpful and that you will appreciate why we could not say more earlier.
Finally, and most importantly, can I say how sorry I am that last season went so horribly wrong for all of us and to thank every one of our supporters who have remained with us for the coming season and ensured that the financial catastrophe forecast by Mick Dennis did not materialise.
Kindest regards
Yours sincerely
Terence Brown
Chairman