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THE OTHER SIDE OF THE FENCE – David Gill interviewed
Despite arriving at Old Trafford over an hour later than planned after his early morning flight from Heathrow was delayed the plc’s Chief Exec still kindly managed to fit us into his busy schedule, giving up an hour of his time for RI to grill him on all things United.
Red Issue: How are you enjoying the job, surprised to be in the hot seat?
David Gill: There have been quite a few challenges over the last seven months but I am enjoying it very much. I was very surprised really, Peter [Kenyon] and I had worked together closely for sometime, we had worked together that summer on transfers as normal and then when he announced out of the blue that he was leaving I was very surprised. I thought that I was in with a decent shout of his role. I have been here since 1997, with a wide range of experience of both the internal workings of Manchester United and the football business and with some good contacts in the football world. I would say that I was hopeful rather than expectant.
RI: What is the "back to the floor" initiative all about?
DG: It was something that I have been involved in previously when I have worked for other companies. I am not too happy with the publicity that it has generated as that was not what it was all about. The exercise was to encourage senior managers to see a different side of the business and hopefully develop some new initiatives. So Ken Merrett worked with the ground staff from the beginning of a match day right through to the start of a match. Someone else worked in the call centre where every morning we have 4000 emails to deal with, 3000 of which are spam. One of the issues that has come up on our fans' survey has been criticism of the catering on the concourse so I thought it would be a good idea to get a closer look at the issues there. It was quite interesting as it was the Middlesbrough game and the mood changed after we were 2-0 down and got a goal back. I had a baseball cap on so only a few people recognised me.
RI: Is it right that you short-changed somebody?
DG: Yes. I gave somebody three 10p pieces instead of three £1 coins - he thought that I was trying to dupe him out of £2.70.
RI: The American catering firm Levy's have been here for twelve months now looking at ways of improving the catering, what progress has been made?
DG: Levy's have looked at the hospitality areas first and have begun to assess the concourse areas. We tried an experiment last season with UCI kiosks doing hot dogs and different types of food. There is no easy solution and we are limited by the size of the kiosks we have but we are doing things like trying to quicken up the tills by introducing EPOS and what we offer is under constant review.
RI: Has a bid been made by Barcelona or Real for Ruud? Why do Barcelona say that they are not going after Thierry Henry as Arsenal say he is not for sale yet 'Van Nistelrooy is still a possibility'. Why have we not sent Barcelona the same message?
DG: No bid has been made whatsoever. I wrote to both Real and Barcelona when this story first surfaced a couple of weeks ago in clear unequivocal terms to say that we have just concluded a new 4 ½ year contract with Ruud to take him through until he is 32. He is delighted with that and he is not for sale full-stop.
RI: Does that new contract contain a buy out clause?
RI: Ruud's agent Roger Linse has had widely reported meetings with Barcelona officials, does the club ever question players on the activities of their agents?
DG: Yes we do. Ruud has stated in the club programme that he is happy with his new contract. We have spoken to his agent since the story first broke about him meeting Barcelona and I spoke to him about supposed contact with Real and he is unequivocal that he has not spoken with them. We don't put all the effort of time and planning into signing these players to lose them so easily. I am as frustrated as anyone else. It is a great drain on management time having to deal with all the speculation and the calls that it generates. When we have finished this interview I will be making another call to Ruud's agent to discuss the matter with him again.
RI: If as is rumoured David Beckham is coming back to England in the summer would United be interested in re-signing him?
DG: I have not discussed that with the manager but I would say that it would be highly unlikely.
RI: Did the club really pay Fabien Barthez £5m?
DG: No. It cost the club £5m to terminate his contract but we only paid him £2.4m - the balance being the write-off in the accounts for the remaining cost of his transfer fee of £7.8m. For accounting purposes this was spread across 6 years, we have had 4 years of value which leaves £2.6m. He had a lucrative contract and he could have decided to stay and see that contract out. In fairness to him he wanted to continue to play but if he moved to France the salary levels would be much lower and he didn't want to take a huge financial hit so we negotiated a payment of £2.4m to terminate his contract. This is a large sum of money to pay but the payback to the accounts is instant as it effectively removes a significant on-going commitment for the club not just in salary costs but in other items such as National Insurance and it was the only way in which he was going to leave.
RI: If the Barthez deal was dealt with so expeditiously how come the Jaap Stam deal is still hanging around?
DG: We are still owed £12m from the Jaap Stam deal and we will receive just over £13m including interest payments. This remaining money is due to start coming in this September, when we get 30% of what we are owed followed by 10% in each of the following 7 months, which means that we will be completely paid up by April 2005. The money is actually coming from the Italian League and not directly from Lazio. We got the Italian League involved and they will act as a clearing house, where the money that Lazio are owed from the Milan clubs from the sale of Crepso and Nesta will go to us and will not go into Lazio's bank account. We had a meeting just the other day to finalise all the arrangements.
RI: So why, when Veron was signed did we pay half up front?
DG: We actually paid most of the money there and then, but if things had been the other way around we would have deducted what we were owed. Unfortunately we bought Veron in July of that year and Jaap left right on transfer deadline day. Hindsight is a wonderful thing. We had guarantees from holding companies and we tried to do something about it but couldn't. To protect the club we have now done things differently. The Milan and Inter debts are bank guaranteed so if there are any further problems the Italian League would just call in the bank.
RI: Is Ronaldinho a player you regret not signing in the summer?
DG: Well he is certainly playing well at the moment isn't he? Do I regret not signing him? I was involved with Peter (Kenyon) in a lot of the negotiations, my sense of it was that he did not really want to come here [Ed. Despite this comment Gill later admitted he never actually met the player in negotiations.]. His brother was a very difficult man to deal with. We negotiated his contract and largely met his demands and I don't think that he can say that we agreed to pay him materially less than Barcelona agreed to pay. There was not a great deal of enthusiasm to agree a deal with us. When we agreed the deal I did not get a sense that there was joy or satisfaction that the deal had been agreed. [Ed. See previous comment.] It is just possible that we were used to gain some leveraged in negotiations with Barcelona.
RI: Alex Ferguson has been quoted as saying that Peter Kenyon ‘did not do the job’ on the Ronaldinho.
DG: I have spoken to Alex about that and I think he will accept that that is just not a correct statement. We agreed his terms but I just got the critical impression that he was more in favour of Barcelona, the Spanish climate and that the Spanish outlook was better for him than us.
RI: The operating expenses in the latest set of interim accounts show a fall from £72.1 million in the same period last year to £66.5 million this year. Where have those savings come from.
DG: That includes wages. The loss of Beckham and Veron, offset against the other new contracts represents a saving of about £2m and the other savings were a consequence of having fewer home games.
RI: Just after declaring that United are no longer in an offer period Malcolm Glazer has bought a large number of shares, a sizeable chunk of which were Maurice Watkins. Do you not find that disturbing?
DG: I don't discuss Maurice's own personal financial affairs but he still has a sizeable shareholding.
RI: Well when Cubic were briefing the media about what they were going to do one of the people they targeted was Maurice Watkins because they believed that he had been on he board so long. Other people within the club would have been targeted as well but with Maurice selling his shares to Glazer that seems significant.
DG: Not at all. Maurice would not have sold his shares direct to Glazer. The shares would have placed with Merrill Lynch in line with our directors’ and staff’s dealing mandate. It is up to Merrills then to get the price that Maurice wants. At the same time as Maurice went in there was obviously a large institutional seller who clearly contacted Merrills to say that they also wanted to sell some shares. Merrill would have packaged it all up, they then possibly felt that the first port of call for that size of holding would be Glazer. Whilst Glazer had come out of the offer period he had at the same time said that he would continue to buy.
RI: Maurice will still continue to be on the board?
DG: He will, he is a very important board member who is widely recognised in the game as having significant experience of footballing matters. Personally I consider him to be a very useful member of the board.
RI: Cubic still have their 28.9% holding and now that their dispute with the manager has been settled do you expect them to relinquish those shares?
DG: I don’t know the answer to that question. We continue to meet with them and they have not given us any indication that they intend to reduce their holding. Whatever is written we do have a working relationship with them. We take them through the results and they in turn have some demanding questions and question us about where the company is going.
RI: Was it a result of pressure from them that gave rise to the recent announcement on ticket prices?
DG: No. We did not discuss that with them. They don't interfere with matters such as player transfers or ticket pricing.
RI: How does the board justify the significant price rises this year when wages are going down and transfer costs are going down? Especially the size of the rises for Champions League games.
DG: We looked at the prices of the other teams and we consider ours to be extremely competitive. Everton are putting up their prices by 30% and other clubs are talking about putting up their prices by 40%. There is a levelling off of the salary levels and subject to what Chelsea do there is a lot more sense coming into the transfer market. A critical element for us is TV income which could be down by up to 15%. We haven't sought to recoup all of that from fans or from executives. On balance demand does outstrip supply by on average 12,000 per home game. If we applied a strict supply and demand business model we would put the prices up by much more than we have done. We feel that the increases are reasonable. It is true that we have not had supplements for the latter stages of the Champions League, but again the proposed top price of a semi-final here at Old Trafford would be £34 which when compared to the £55 that Porto charged this year or the costs of FA Cup semi-final or final tickets we think reasonable. We are hurting from the withdrawal of the 2nd phase of the Champions League. Hopefully the fans will see that there is a balance to be achieved. If our income goes down then we have got to recoup some of that money if we are to maintain our 50% wages/turnover target. We have got to see how we manage player wages, what that means for team building and therefore what does that mean for the product that the fans are seeing on the pitch.
RI: You have again refused to introduce an instalment scheme and to make matters worse you are going to charge a premium on purchases made by credit or debit card which is nothing short of gross exploitation.
DG: It is not gross exploitation. If people pay by credit card there is a cost to that of between 1 and 1¼%. People still have the ability to pay by cheque which will continue to be free. Nick Humby has stated that that charge will generate circa £300,000
RI: If you are only being charged 1% why are fans being charged 3%?
DG: The 1% is a direct payment to the card issuer then there are the costs of the staff. The point is that we still need to raise that money we either do it this way or we put it directly on tickets and that was the choice we made.
RI: The 3% the club charges for season tickets is on top of the charges made for away match tickets and cup games. The sale of FA Cup Final tickets alone will raise another £52,000 on top of what are already extortionate prices.
DG: But those aren't our prices.
RI: No but the extra £52,000 is your charge. The staff costs would be there anyway even if we did not get to the FA Cup Final.
DG: There are still overtime costs and all that…I am not sitting here today denying that there isn't an element of recovery, as there clearly is but I am not saying that it is that large that it is extortionate. If you buy a ticket for the MEN or a concert you will get those charges.Even after the proposed rises we will still compare favourably with other clubs and the rises are still not as steep as those proposed by Everton.
RI: But where is the cost benefit to the fans of having this huge cash-generating plc machine? The money generated surely should be used to subsidise ticket prices for fans.
DG: Don't you think it is?
DG: But if we are turning away 12,000 people per game someone else can come in here and say that if I am losing between £5-7m from TV income we have to find a way to bridge that gap. Do we want somebody else coming in and promising to pump millions in then lose heart and leave us in a mess? We need to have a sensible business plan which includes the target of wages being 50% of turnover and that is what drives it.
RI: One way of countering anyone coming in and doing an ‘Abramovich’ is to take the company private and give the fans a golden share through a supporters' trust, surely that is a better route.
DG: Taking the company private can be done but as a theoretical exercise it is very difficult given the value of the company and the current P/E ratio etc. The issue considering supporter involvement is one that we do take very seriously which we are exploring with Shareholders United. We could not do anything whilst we were in an offer period, but subsequent to the ending of the offer period meetings have been held and we think that here is a great deal of merit in their proposals and we are exploring them as quickly as we can.
RI: Don't you think that the proposed price rises could have a negative effect on demand?
DG: No. We would not be proposing to expand the ground if we thought that would be the case. We are currently in a period of planning and design with hopefully planning permission being sought in September. The tender process would start in summer 2005 through to October and then we start the North West quadrant in March 2006. That would be finished in May with everything on-stream for season 06/07. The footprint of the new stands is marked out on the ground already so we can gain an idea of crowd flow. We don't want to have the capacity reduced during the build phase. Everything is driven by planning so we have got to consult with the neighbours and the authorities.
RI: The club struggles to sell the 500 tickets set aside for junior members in East Lower, why not make them pay-on-the-gate?
DG: Well there are security issues to associated with people just rolling up to the turnstile.
RI: Entry could be restricted to United members carrying membership cards. At present it is difficult for under-16s to obtain the use of a cheque book or credit card to buy the tickets in advance of a game.
DG: Well I am not going to rule anything out and if you put your proposals to me in writing then we will look at them. I will have to discuss them with other departments but I am happy to do that.
RI: Trafford Council's safety report gave rise to concerns over safety for fans in West Tier Two. With the expansion of the ground would you consider moving more vociferous fans to other parts of the stadium?
DG: Not at the moment no. We haven't determined yet what the split of the additional 7500 seats is going to be. It comes down to the economics the new development will cost - roughly £45m for 7500 seats which is a cost of £6000 per seat. The East and West stands by comparison worked out at £2500 per seat where there are no executive facilities. So we clearly need to get the right balance right.
RI: There was a member of staff recently suspended for allegedly viewing pornographic material using company computer, how does the club justify that as a policy decision given the accusations made against Martin Edwards and his role as club President?
DG: I think we have been over this ground quite a lot and they are separate matters. The board supported Martin being made President to reflect the contribution that the Edwards family has made to Manchester United. Martin was a key element of the success in the 90s and we feel comfortable to reflect that in the presidency. It is an honorary role with no pay associated with it and he never represents the club on club business.
RI: Why did the club not support the fans against the FA's decision to cut our allocation?
DG: We did. I had numerous conversations with the FA and calls to the FA expressing our concern over it. I thought it was scandalous. It was wrong, the FA should have notified us about it before. If Villa Park cannot steward the game to capacity then they should not be given the game quite frankly.
RI: With roughly £40m coming in from the sale of Veron and Beckham and £40m going out is there a balancing act done each summer on transfers?
DG: No not really. If you look back over the last two years we have effectively invested about £15m net.
RI: Will the manager still be the manager at the start of next season?
DG: Yes. There are no plans whatsoever for him to leave.
RI: Will funds be made available for him to invest in the team?
DG: I have a meeting with him in the next couple of weeks to review where we are and what his thoughts are. We will then discuss that and we will take it to the board and see what is necessary. We did make quite a few changes last summer, plus we bought Saha in the transfer window at £12.8m. Liam Millar is coming in July. We are not going to rest on our laurels, we will take his advice and see what is necessary. We are very clear that we must have a successful team.
RI: Given that the City of Manchester Stadium has been built with taxpayers’ and lottery money has any thought been given to playing our reserve games there rather than asking supporters to travel to Altrincham?
DG: To answer your question directly, no it hasn't. However the structure of the game is changing next year - instead of having under-17s and under-19s teams there will be an under-18s team plus an open age reserve team. So we will effectively have two reserve teams, one of whom will be playing in the PL reserve league and the other will be entered into the Pontins League. We are going to see how that works out - it may only be a one season experiment. We are staying at Altrincham but we are looking at where the other team might play and we have considered the mini athletics stadium at Eastlands next door to the main stadium. We have also looked at Hyde United and Bury again. There are restrictions on where we can play these games but that suggestion is an interesting one.
A very interesting one indeed. Given City’s current financial predicament how amusingly brilliant would it be if City’s great new home for their great new future became our reserve team stadium. Anyway, on that bombshell we thanked Mr. Gill for his time and left him to go about club business.