Why Royals need to cut backBy Nick Ive
May 30, 2008
Nigel Howe has revealed that Reading have had to tighten their purse strings because of mounting bank repayments and the fact that chairman John Madejski no longer subsidises the club.
Madejski has spent around £40million on Royals since taking over the helm in December 1990.
While he is sure to recoup that and more when he sells up, the multi-millionaire boss is desperate for the club to be financially self-sufficient.
Reading netted an estimated £50million from their two years in the Premier League and will receive £11m in parachute payments for the next two seasons following relegation to the Championship.
Manager Steve Coppell spent only a fraction of his available budget on new signings, but has still been told he must sell before buying this summer.
However, Reading FC chief executive Howe revealed that the playing and coaching staff’s wage bill shot up from around £9million to £30million following promotion – and that went up again slightly last season.
Although salaries will now be slashed by around 40 per cent, Royals are still on a tight budget as they are repaying bank loans.
In an exclusive interview with the Evening Post, Howe revealed: “We have got players on enormous wages and even though wages have been cut we now only get £11m compared to £30m had we stayed up.
“There is also the cost of the training ground, refurbishment, overdrafts, loans and a new pitch cost £1m.
“In previous years we have made substantial losses and had huge overdrafts. We have to cover for those and that means we have large bank overdrafts.
“But the money certainly hasn’t been squandered. We have had to repay debts and pay capital expenditure for things like the training ground, refurbishment work and keeping things up-to-date.
“Banks always want their money back, especially from a club that gets relegated. When that happens they want it back very quickly.”
Madejski used to subsidise the club with loans, offering far better rates of interest than banks, but he stopped that several years ago with the aim of getting Reading to be financially stable on its own.
“John Madejski is not putting money in now – he hasn’t for a long time,” revealed Howe.
“He can’t go on putting money in every five minutes. He wants the club to stand on its own two feet and be self-sufficient and that’s not unreasonable.
“He has put a lot of money in over the years and he still has loans he’s owed by the club.
“He loaned the club money to build the hotel and money that has been invested in the club over a number of years, including when we moved from Elm Park and we have to balance things up.
“He is still owed money. In loans and shares he has made an investment of around £40million and that is enough for any bloke.
“He (Madejski) may make a profit if and when he sells, but no-one has shown any interest yet.”
Despite the tightening of the purse strings and Coppell’s restrictions in the transfer market, Howe insists Reading are in good shape to rebuild.
“We are financially stable – as much as we can be considering we have lost around 50-per-cent of our potential income,” said the chief executive.
“Despite coming down to the Championship, we are in reasonable shape to either maintain the squad or add to it.
“What we have said about selling players is right but ideally we are going to listen to the right offers and unless we get the right offer then no one is going anywhere.
“I would say we will more or less have the same squad next season.
“He won’t want to buy if no one goes – he will only want to do that if he sells players.
“If some did go that money would be re-invested into the squad. That’s what West Brom did.
“I think they sold £17million worth of players and brought in £10million players, but there is no panic to sell players and there is no pressure to sell.
“We might be able to pick up one or two players on loans and he has said the squad is too big anyway.”