Over the last few years we have had multiple questions and discussions about the decisions and planning around Plough Lane and especially the West Stand.
The board have worked closely with the club leadership and management team to give members some more insight here:
The cost of our stadium and, especially, the West Stand. Why was the West stand so much more expensive than the rest of the build and why did we make the decision to build in that way?
Members will be aware, but for clarity, the cost of the stadium is not just the cost of the stands. The pitch, the facilities surrounding the stadium and so on all contributed to the cost. It’s right to say that the three semi-permanent stands are a small proportion of the overall cost.
The West stand includes all of the facilities that are needed by any professional football league Club – the changing rooms, Club offices and hospitality facilities etc which are a considerable improvement from Kingsmeadow.
It would not be possible to have constructed a West stand for a similar cost to the East. We also chose to include a large Club shop, which is profitable and hugely popular, and we were able to utilise the space from the stadium to include a pub in the main stand.
At the time the Club were considering what would be right for us to build, there was no formal thought to building ‘Kingsmeadow II’. Instead, the Club believed that the best option was a scaleable stadium with a first stage to include high quality events and hospitality facilities, corporate boxes and so on in the West stand.
The ambition with these was to enable us to earn non-match day income through hosting outside events. As part of the scaleable nature of the build, we decided to construct a three tier main stand with the third tier currently a shell. As and when we decide the time is right, we have the shell there to fit out for corporate boxes or whatever is most appropriate for the Club at the time.
The remaining three stands are constructed on a semi-permanent basis with full planning permission to enable us, when we believe it is appropriate, to build out.
Of course, the Club’s ambitions, as with so many other businesses (particularly in the hospitality and entertainment sector) was severely affected by Covid. This meant that we had to play behind closed doors for a period of time and were unable to offer our spaces for external (or internal) events, and that when restrictions were lifted, and people started to hold external events, they did so on a cautious basis at first, and would go to venues they had previously used.
However, the Club has now improved its hospitality and hosting offer and performance. We are at roughly 81% capacity for corporate boxes on match days and our lounges are at between 67% and 94% capacity.
In terms of non-matchdays, our stadium usage and profitability has increased significantly (e.g. Broncos, May pitch hires, pitch photoshoots) but we are not quite as advanced in terms of our day to day Corporate & Entertainment hires – although the direction of travel is the right one. We have improved our sales by 50% over the past two years and the new MD is targeted to improve these sales further as a key performance indicator.
Obviously there is huge capacity on non-matchday events. We are in a catering / C&E deal, and we are actively reviewing this agreement / going to market (whilst inviting the incumbent to bid). Sales responsibility for non-matchday sales (whether the Club, or the catering partner – the latter is the current model) is one of many discussion points.
It is also worth noting that having a stadium of the stature that we have has other benefits. We have large numbers of football tourists, good media exposure and enquiries about filming.
One further factor which has affected our profitability has been the flood. Although the ability to host football matches was restored relatively quickly (albeit that rearranged matches on a Tuesday night generate about half the the revenue that Saturdays do) we are still at a stage where the effects are quite obvious (e.g. office, reception reinstatement) and staff are having to spend a lot of time putting things right. In addition, our ability to host external events was disrupted in the run up to the Christmas period. Floods in the area of our ground are not uncommon and so the staff are putting in place mitigation measures to ensure that a future flood does not have the same disrupting effect.
In short, the Club had the choice of building a new stadium that was a larger version of Kingsmeadow but would not attract much outside income and would not be scaleable in the event that our fan base and league position demanded more.
But the Club and Dons Trust chose to build something that had the opportunity to earn more on both match days and non-match days and to help meet the future financial challenges. It is perfectly justifiable to hold the view that we should have gone down the alternative (or another) route, but the decision has been taken and is not one that we are looking to reconsider.
The latest finance update and annual report showed an increase in operating costs and cost of sales for the last financial year. At our most recent AGM James Woodroof (MD) and Laurie Hill (head of finance) gave a presentation to members giving more details. In short:
Our operating costs have gone up significantly (£11.3m up from £8.5m or 33%) and within that our cost of sales have also gone up to £7.4m from £5.6m or 32%.
It should be noted that cost of sales is an accounting term, and includes a wide variety of costs, and the single largest item is the first team wage bill, and includes all match day costs, and not just the pure cost of the items that we sell.
As our revenue lines grow we will see an increased level of costs in relation to these sales – for example selling more merchandise in the shop means we have to buy more stock, enhanced cup performance means we have to pay for additional games to be played at Plough Lane (e.g. providing security, hospitality) and we also need to meet liabilities in relation to both cup success (e.g. sharing of prize money with players) and player sales. These could all be considered as “good” costs to incur.
We have also consciously invested in all areas of football across the Club – notably increasing the Men’s playing budget whilst investing more in key football staff (e.g. director of football), the academy and the Women’s team. We believe we are now seeing the benefits of this investment with our higher league position (and opportunity to push for promotion), better overall season on season performance in cup competitions, continued income generated via sales of academy players and the promotion of the Women’s team to the Tier 3.
At the same time we have faced severe inflationary pressure particularly in relation to employment costs which has seen the cost of running our matchday increase significantly particularly in relation to security and hospitality. We also remain committed to paying the London Living Wage which has seen double digit annual increases over the last few years.
What can the new Dons Trust board do to help manage costs?
The first meeting of the new board was on 8th January, and we are now in receipt of the six month management accounts to 31 December 2024.
The role of the DTB is one of oversight, and whilst the board will be reviewing these accounts, the majority of the costs for the year are committed, and the key role of the DTB will be to critically review and challenge the proposed budget for 2024/25.
We are conscious that our cost base cannot continue to increase faster than the growth of our revenue and cost management is a major ongoing target for the senior management team. On the flip side the recent investment gives us a good opportunity of promotion this season with the future target of operating the stadium more cost efficiently in League One.