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Last Updated: Tuesday, 28 October, 2003, 12:10 GMT
Six months to save Leeds
By Stuart Roach

Former Chelsea chief executive Trevor Birch

Trevor Birch may have six months to save Leeds United from ruin.

The former Chelsea chief executive steps aboard amid turbulent waters, aiming to keep afloat the ship Professor John McKenzie has steadied in his six months in charge.

At first glance, with the club 78m in debt and having just posted record losses of nearly 50m, not even Noah could prevent Leeds plc from sinking without a trace.

But McKenzie's initial actions have at least laid the foundations for Birch's survival plan to be put into place.

Birch takes over on 1 November and will be judged, at least initially, on the next set of accounts due for release in March.

Operating loss of 25.4m
(excluding player transfers)
Wage bill up by 3m
Turnover down 21%
Tangible assets down from 109m to 60m
Television/broadcasting income down by 36%

By then, Leeds fans will be closer to seeing whether McKenzie's new regime is having an affect on the mess left behind by Peter Ridsdale's disastrous stewardship.

And Leeds' on-the-pitch plight will also be clearer.

Relegation would cost an estimated 12m in lost television rights and gate receipts - and that would be the bale of straw to break Leeds' financial back.

Premiership survival, coupled with McKenzie and Birch's plans for the future, would give Leeds some hope.

Birch's first task will be to make progress on the three key survival elements put in place by McKenzie on his arrival on 1 April.

Trading at break-even levels

The chairman claims to be close to achieving the first aim and will be expecting Birch to finish the job he has started.

On the face of it, selling players remains the most obvious way out.

But complicated player purchases have tied Leeds in financial knots.

The figures released on Tuesday showed that, despite the sales of players including Rio Ferdinand, Harry Kewell and Lee Bowyer in the accounting period, Leeds lost 17m in transfers and saw their wage bill rise by 3m.

Much of the reason for that financial quirk is that Leeds bought several players by securing loans to raise the money for their transfer fees.

In the case of Robbie Fowler, that meant repaying an 11m loan when United only realised 5m in selling him to Manchester City.

The club also continue to pay some of Fowler's wages and part of Danny Mills' salary during his loan spell at Middlesbrough, while McKenzie has revealed Mark Viduka was purchased on lease and that selling him would only realise a third of his 6m fee.

The wage bill was further increased by one-off redundancy payments of 7.2m, 5.7m of which was payable to former managers Terry Venables and David O'Leary and their coaching staff.

The absence of those payments from the next balance sheet will be boosted by the 5m in wages those redundancies realise.

Further reducing that wage bill will be a major target for Birch, though selling more players will represent a major gamble against relegation.

McKenzie insists further players will only be sold if they request a move - and if the price is right.

Even then, a January transfer window sale would not show up in the next set of figures.

More realistic will be avoiding the long-term contracts thrown around like confetti by the previous regime, with O'Leary sitting on a 10-year deal that cost 4m to break.

Restructure debt repayments

Leeds chairman Professor John McKenzie
Professor John McKenzie has laid survival foundations
Negotiating improved terms in respect of repaying their debts is crucial to the club's future.

At present, Leeds need to pay close to 7m in interest on their debts every year.

Servicing that debt pile is "slowly strangling" the club, according to football analyst Vinay Bedi at stockbrokers Brewn Dolphin.

Addressing the interest payments is the critical role of the new management team, with Birch working closely alongside finance director Neil Robson.

That could mean renegotiating a longer period of repayment in order to make progress against their debt, rather than simply meeting it year on year.

Attract cash investors

Possibly the tallest order for Birch will be attracting investors to throw their money into Leeds.

Supporter Allan Leighton has pumped 4.4m into the club, a welcome contribution but a drop in the ocean of debt Leeds are currently floating on.

McKenzie has hinted at more investment in the new year, though that would come too late to show in the annual financial report due for release in March.

Birch has worked as an accountant and a director at Chelsea, a club whose finances were in a mess similar to that of Leeds before the arrival of Roman Abramovich.

But if McKenzie and financial consultants Ernst and Young have failed to attract major money in the last six months, then Birch may also struggle to do so.

While 4.4m is welcome, Leeds need more like 44m - or even 444m - to turn their finances around.

Ironically, Leeds' best hope of a financial white knight would be another Abramovich.

And, while McKenzie claims he is learning Japanese, Arabic and Russian just in case a suitor rides Leeds' way, Birch may be twitching at the thought of another sugar daddy arriving at his club.

Birch was effectively demoted at Chelsea when Abramovich's arrival prompted a move for Manchester United chief executive Peter Kenyon.

At least this time Birch has the chance to prove his worth.

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