Sunday 26 May 2019

Richard Curran: 'FAI must get its house in order to refinance €39m borrowings'

FAI's John Delaney at the Aviva stadium. Photo: Gerry Mooney
FAI's John Delaney at the Aviva stadium. Photo: Gerry Mooney
Richard Curran

Richard Curran

There is a figure included in the 2017 accounts for the Football Association of Ireland which truly reflects how reliant the organisation was on its chief executive John Delaney.

The figure says that "key management" personnel received total remuneration of €430,000 that year. We know that as CEO Delaney, pictured, was on €360,000. He received the benefit of another €36,000 per year as the association paid his rent.

If the chief executive's remuneration is included in the key management figure, as would be fairly typical in company accounts, the remaining key management received just €34,000 in total.

If Delaney's remuneration is not included in that figure, because he was also a director, he was still earning nearly as much as all the other key management put together. Yet the FAI is a large organisation with a turnover of around €50m per year, something which requires well-paid expertise beyond CEO.

No wonder John Treacy of Sport Ireland is talking about the need for the board of the FAI in the future to lead the association and not the chief executive.

With a commitment to resign coming from the whole board, there appears to be a genuine desire to look ahead and do things in a different way. But there are two problems - how to handle the transition and the financial challenges into the future.

If the board all left in the morning, a new board would have to be elected immediately to replace them. Would they be elected under the existing board structure and rules or under new ones?

If it were to be a new structure, who would introduce and sign off on the new structures and rules if the board is gone? This is a logistical problem as much as an issue of changing the culture of the association.

The FAI's rules don't allow for external independently appointed people with a level of expertise and distance from the management team to come in and ask some tough questions.

The association is made up of very committed and experienced football people who may have relied too much on the experience and leadership of their CEO to run things.

One option is to have an EGM and reappoint a board on a short-term basis who could receive the various consultants' reports, implement a new structure and then go for re-election under the new rules.

This too could be messy and involve two major voting assemblies for members in a short space of time. The other option is for the current remaining eight board members to agree to any new structural changes, and then go.

In the meantime, John Delaney remains on the payroll and somebody will have to take a decision about his future as vice-president. If the investigations make damning conclusions about any aspect of his stewardships of the association as CEO, he can argue that he isn't CEO anymore.

Can he be dismissed from a job in which he hasn't done anything wrong - namely the new vice-president role? Possibly, but it could be a long drawn-out and expensive process.

Presumably, he has a new contract or agreement covering his new role which covers the cost of buying him out of it, if he refused to resign the post.

Meanwhile, the FAI's accounts and annual report covering 2018 will be anxiously awaited. It may be quite complicated and contain formal disclosures about the €100,000 loan Delaney gave the association in 2017, which did not feature in the last annual report.

The FAI accounts for 2017 paint two different pictures. Firstly, they showed the FAI had a better operational performance than in 2016 with higher international match income, slightly higher commercial income and higher revenues from running training courses. It also reported a €2.75m surplus, up from €2.34m the previous year.

Yet, at the end of December 2017 it had no cash in the bank and a €1.3m bank overdraft which didn't exist the year before. It had bank borrowings at the end of 2017 of €38.2m, slightly down from €39m a year earlier.

But it had no cash, so net debt actually increased in 2017, despite a significant fall in its annual interest bill. The association was due to repay €2.6m of debt last year, a further €3.7m this year and the remaining €32.2m is due between next year and 2022.

In all likelihood it will be able to refinance this debt when the time comes, but only if it can get a clean bill of health for its bankers. Once the auditors reported a suspected breach of the Companies Act on the grounds of not keeping proper books, a lot of important financial issues come into play.

Banks would be very slow to re-finance tens of millions of debt, including nearly €4m this year, if they were not satisfied that everything was being run properly.

The €100,000 'bridging loan' inadvertently sparked an existential crisis for the FAI, from state funding to the ability to re-finance debt. That is why it is so important that changes are introduced quickly.

 

NBP will be a work in progress for many years to come

Taoiseach Leo Varadkar finally confirmed during the week what we already knew - that the proposed National Broadband Plan will cost €3bn if it goes ahead.

This figure made it into the public domain some months ago and the Government now has a real headache. It can green-light a €3bn public spend on a rural broadband network the State won't own or it can risk the political ire of rural Ireland by putting the plan in cold storage.

The other option of course is to find a different ownership/financing model like a Plan B or Plan C. This might involve the State building and owning the network or incentivising private sector operators to provide rural broadband but just not to every single home. It is very late in the day to go looking for Plan B or C.

It isn't surprising to think the plan will cost €3bn but it is surprising that such a model has got this far down the road. Surely, this financial outcome could have been seen a long way off.

My prediction is that the Government will green-light a major €3bn rural broadband scheme, which will begin but probably won't be completed. As private sector mobile solutions evolve in the coming years, the limited commercial case for this plan will be even more heavily undermined.

A National Broadband Plan will have a beginning, but ever seeing the middle and end is what I would worry about.

 

Paddy Cosgrave spins a tax web

What is Web Summit founder Paddy Cosgrave trying to achieve? Raise public awareness across Europe about Ireland's tax policies? Generate publicity? Do the right thing?

Wealthy people have turned to advertising campaigns to make a political point before. But Cosgrave chose to pay for ads anonymously, and then out himself as the originator. This is a little unusual and no doubt something that helps generate the maximum publicity impact at home in Ireland. But the ads were targeted at governments, businesses and agencies in Europe.

Of course Cosgrave has a point about how Ireland has facilitated multinationals in reducing the taxes they pay anywhere. However, he is wrong to suggest we in Ireland should be collecting those billions. We were never going to get that money.

He is right when he points to tax breaks afforded vulture funds in property. Yet, that was several years ago, and many of them are no longer available in the same way.

Tech and pharma giants availed of our generous tax structures to avoid paying US taxes because the American corporate tax system was archaic. That has changed. Loopholes have been closed.

Finally, if he wants to raise real issues about corporate tax structures and small countries, he should begin his next campaign against Luxembourg, Malta, the Netherlands etc, etc.

He may end up spending a lot of money on ads.

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