Shareholders of the club have been given notice of a Special General Meeting on October 20, 2023 to approve a £1.6million equity investment by Phil & Ashley Kirk. This investment has already been approved by Phil, Ashley and the Trust and is therefore expected to be approved at the Special General Meeting. Given the need for legal words in the official proposal, everyone thought it would be useful to set out what was happening in day-to-day language. This note will also explain the background and structure of the investment.
It is important to know that having received the support of the Trust and the board, the brothers have advanced 50% of these funds as a prepayment against the share issue.
Of the total new £1.6million investment, just under £980,000 will be invested in exchange for new A ordinary shares. After the share issue, the Trust will own around 55% of the ordinary shares in the club. Phil & Ashley will own around 40% and other supporters just under 5%.
Just over £620,000 of the investment will be for non-voting preference shares held by Phil which will accrue interest at 5%. These shares are redeemable (can be repaid) if the board wish. This repayment is not mandatory and such a repayment can only happen out of any profits the club makes and not ahead of any loans the club currently has outstanding. This arrangement gives the Trust the flexibility to remain as majority owner of the club without having to find cash it doesn’t have. The club is not easily able to take on further debt without gaining the approval from the club’s other lenders who are currently more focussed on their debts being repaid.
It is also useful to set out some context for the investment. Attendances and support through 2023 have been fantastic and the club is close to breaking even in the 2023/24 season. However, it is still burning through cash and will undoubtedly show a loss for the last financial year. Although reaching the play-off final was a great achievement, we were disappointed with the result and somewhat aggrieved to only receive just over £116,000 as our share of the Wembley play-off final profit. Given expenses are not included against this amount we realised considerably less than £100,000 from that game. Apart from funding working capital and last season’s shortfall, the investment has been committed in a number of other areas.
Firstly, the club is currently undergoing a reorganisation and is working hard to match cash income to outgoings. Rationalising and rebuilding any squad costs money and the club has worked hard to attract the calibre of player that should help us achieve the goal of promotion. In addition, significant cash has been spent on players who are not part of our plans and have permanently left the club. Fortunately this will reduce the long-term cost but does result in a short-term cash drain.
Secondly, we had also hoped to defer payment of principal loan money due to the two Councils but given the difficult circumstances both Councils face, that is not now possible. The club remains liable for those two loans that were used by the Trust to rescue the club, along with the additional loan from Sport England. The repayment of these amounts is not immaterial.
Lastly and with tangible results already, the brothers’ investment commitment has enabled the club to begin the development of the Erwin Training Ground. Whilst the team are already seeing the benefits of this, we hope with further sponsorship this will tremendously help the squad in this season and many more.
Not requiring shareholder approval, Phil will also lend the club a further £166,000 to enable an immediate repayment of £206,000 to Sport England. The £40,000 balance of this repayment will be out of working capital. Phil’s loan will effectively replace £166,000 of the Sport England loan and be repaid to Phil in two equal instalments in June 2024 and 2025. Both loans carry an interest rate of 2%.
