QPR show how to lose £27m in four years

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Rather fewer than the nearly 12,000 people who watched Queen's Park Rangers beat Cardiff City on Tuesday night will file into Loftus Road today for the latest solemn instalment of the club's extravagant financial collapse. Those who do turn up for the creditors' meeting will find some glum reading matter on their seats: the administrators' matter-of-fact account of waste, including nearly £27m of losses over the last four years. Nearly £4m is owed to the VAT tax man and assorted creditors, and £11m to the club's owner and former chairman, Chris Wright, who has his debts secured over the club's property.

Ray Hocking, of BDO Stoy Hayward, the joint administrator, confirmed yesterday that he is holding talks with a consortium interested in providing enough for QPR to pay off Wright and all the other creditors. The group, whose members are mostly London-based, with one member in Switzerland and one in the Midlands, are also understood to be promising funds for the club itself. So there are currently some grounds for optimism. The chief executive, David Davies, who joined in July 2000, promised yesterday that there will be no return to the recent years of wilful extravagance. "Lessons here have been hard learned, and we are determined to run the club responsibly in the future, as we have done during the period of administration," he said.

QPR's is the most spectacular collapse of all the football clubs which headed eagerly for the Stock Market in 1996-97. Several made quick fortunes for a new breed of investor suddenly interested in the century-old national game. The club, the official prospectus noted, had been established in 1886. A founder member of the Third Division in 1920, they were also a founder member of the breakaway Premier League in 1992, and were only relegated from the Premiership in 1996. The prospectus lists a distinguished roll call of players QPR had brought in from lower-division clubs and made money by selling on: Les Ferdinand (signed from Hayes), David Seaman (Birmingham), Darren Peacock (Hereford), Paul Parker (Fulham), Andy Impey (Yeading), Trevor Sinclair (Blackpool) and Andy Sinton (Brentford). The club had made a £1.7m profit in 1996 and the highest-paid director earned just £4,932.

Chris Wright, chairman of the Chrysalis music and entertainment group and a Loftus Road season-ticket holder, bought in separate deals QPR, and Wasps Rugby Club, in August 1996, for nearly £9m plus £4m borrowed from Barclays Bank. QPR were bought from the Thompson family for around £9m and the trustees of the old amateur Wasps club were given £3.5m worth of shares in the new holding company, Loftus Road plc.

The flotation, the latest in a rush of football clubs to a Stock Market suddenly dazzled by the television millions pouring into the Premier League, raised an additional £12m for Loftus Road plc. Wright owned a majority of the shares, some personally, some through his Culture Vulture Pension Fund and others through a family trust. The prospectus talked of the "synergies" and "economies of scale" to be gained from bringing the football and rugby clubs together under the same roofs, which "should result in significantly increased revenues." A newspaper article of the time summed up the mood with the headline: "Footie thrashes the Footsie".

The directors immediately rewarded themselves. One, Charles Levison, was paid £100,000 in "success fees" for working on the acquisitions and flotation. Chris Wright himself became a part-time non-executive director, for which the club paid £8,000 per month, £96,000 a year, to Chrysalis. Since the administration, Wright has several times said that he was not "hands on" enough. QPR, Wasps and Loftus Road each had their own chief executives. QPR's, Clive Berlin, a former players' agent, was given a £100,000 salary, plus bonuses, benefits and a car.

The extravagant deals which Berlin then did, flush with the flotation money, look, in hindsight, endearingly homespun compared to the exotic talent on which other clubs were spending their own nouveaux riches. Two of the big signings, Gavin Peacock and John Spencer, were pushed out by the Euro-influx at Chelsea which began with Ruud Gullit and Gianluca Vialli. Mike Sheron, a £2.5m signing from Stoke, was the other major signing of Wright's reign. According to Davies, the salary deals for players were, simply, too much, and for too long. Most players were on five-year deals. Fifteen youth team players were on full-time salaries, with several being paid £50,000-£60,000 a year and three or four on over £100,000 a year. "You cannot blame the then chief executive personally," he was at pains to stress. "The whole board sanctioned these deals and the club itself has to take responsibility."

The proceeds of the flotation were frittered away. Wasps' ground at Sudbury was sold to McAlpine Homes, for around £9m. The money paid off some of Wright's loans to Loftus Road and was poured down the wages black hole. When Wright finally called a halt in April this year and surrendered the club to administration, QPR had 61 full-time professional players and a wage bill over a third higher than the club's income.

"As has been well documented," says Hocking's report, with deadpan understatement, "the economics of professional football and rugby union are marginal at best."

The losses Hocking lists were, between 1997 and 2000, £27m. Directors' pay ballooned: 10 directors, including Wright, were paid a total £490,000 in 1997, 11 were on the payroll at £373,000 in 1998, nine were paid a total £512,000 in 1999. Numbers were reduced to three by 2000; Wright's pay dropped to £32,000.

Since the administration began, 20 players have been released. Some who were out of contract, such as Paul Murray and Karl Reddy, they would have liked to have kept. The agreements with the Professional Footballers' Association do not allow footballers to be made redundant, but "compromise agreements" were made which meant some of the youth players have now left the club. Given the current dispute in which the PFA is demanding a significant share of the Premiership's latest billion pound TV deal, it is salutary to hear from Davies that six members of QPR's administrative staff, a fifth of the office workforce, have been made redundant. "If I could have laid off one player whom we didn't want any more, I could have saved more than we did having to make six people redundant. I understand the PFA's argument that players have to be protected because their careers are short, but I do not think that argument is realistic any more in the current economic circumstances."

Chris Wright has consistently said he has lost £20m on his Stock Market punt of his football club. This is accounted for mainly by the acquisition and investment when QPR floated, although the prospectus does carry a warning that: "Potential investors should be aware that the value of shares could rise or fall." He has also propped up the club with £11m worth of loans which have now been reduced by his purchase from the administrators of Wasps, for £2.5m, and both clubs' Twyford Avenue training ground for a further £2.5m. The QPR 1st Supporters Trust, which launched shortly after the club entered into administration, has campaigned to ensure QPR is guaranteed a share of any profit Wright might make by selling Twyford Avenue in the future. David Davies said yesterday they do have such an agreement, although he would not disclose what QPR's share is.

Davies, whose background is in entertainment venues and ice hockey, here and in the US, believes football should have a salary cap, as rugby union now does, with its ceiling of £1.8m for the wages of top clubs. "It is the only sensible way forward," he said. "Clubs have to keep to sensible limits otherwise there will be a major collapse very soon. The banks are not sympathetic to football any more. We've learned this the hard way." Hocking was succinct: "Given the talk that's going around, it looks certain that there will be more football club insolvencies." QPR's experience shows there are real victims to these collapses, as well as those retreating, with their fingers burned, from the notion of five years ago that there was money to be made in football stocks.