Town chairman David Sheepshanks laid out the reasons for the club's current financial woes at the AGM this evening and seemed largely to be amongst friends.

The chairman, flanked by the rest of the board including new member Derek Bowden, spoke at length on the the reasons for the club's dramatic fall from grace.

After making his speech (see below), he took questions on a number of subjects.

The 25-year, £25 million bond was a source of a fair amount of questioning with the chairman giving assurances that like similar arrangements at Southampton and Manchester City the securitisation is based on conservative estimates of receipts. These based on a worst-case scenario of the Club consistently playing in the First Division. He added that there was "no chance" of funding being withdrawn.

Sheepshanks spoke for the first time on the on-going discussions regarding a settlement with former manager George Burley. Recently Burley said that negotiations were nearing an end, although Sheepshanks did not confirm this.

The subject of player pay based on whiuch division the club is in came up with Sheepshanks revealing that some players had been on such deals when the Blues were in the First Division.

However, as Town's success saw them into the UEFA Cup Sheepshanks says the type of player we were looking to buy would not have accepted such deals: "None of the players we were able to recruit at that time would have come on that basis and existing players might have gone elsewhere."

The chairman says that while the Club could have held onto players while paying them a wage relatively low for the Premiership when newly-promoted, this would not have been the case with the side now pushed into a higher echelon.

The chairman felt that the Blues were lucky to get the £4.5 million fee for Titus Bramble in the early part of the summer, a price he felt was more in keeping with the valuations of last season, prior to the summer collapse of the transfer market. He felt that supporters would have to get used to lower transfer fees becoming the norm in the years to come.

Asked about loanees Ulrich Le Pen and Matteo Sereni he said that there are agreements in place for their moves to become permanent and said: "We wish them extraordinary success between now and the end of the season."

Sheepshanks apologised for the leak of the accounts to a local paper prior to their being sent to shareholders and said that an investigation was on-going.

TXU's sponsorship is not in question despite their recent takeover by Powergen. The contract has 18 months to run and the Blues will continue to have TXU Energi emblazoned across their shirts while relations between the club and the new sposors are said to be good.

On the subject of electronic turnstiles Sheepshanks said that due to the expense of buying them and having them installed they wouldn't be introduced until the Club returned to the Premiership.

The meeting ended with a sober round of applause from shareholders who had voted Sheepshanks and John Kerr back onto the board for another three years while Chief Executive Derek Bowden was voted on for the first time.

Chairman's Speech

In the relatively short time available, in order to make this address as worthwhile as possible, I will assume that you have all read my Chairman's Report and so I will try not to go over too much of the same ground. I want this evening to try and give you an insight not only into what went wrong last season and why - but more importantly into our present situation and some of the key issues and challenges which we now have to face.

I am going to split my speech into the following headlines:

1. Financial Accounts - Year Ended 30th June 2001
2. Last Season - What happened & why
3. The Closed season activity and the market collapse
4. The Legacy we have to manage
5. The present situation
6. My position as Chairman
7. The future outlook for Ipswich Town

Financial Accounts - Year Ended 30th June 2001
Throughout last season I warned supporters and shareholders that there would be severe consequences if we were to be relegated but none of us could have foreseen the cruel combination of factors that led to such a sudden economic crisis in the world of football last August and the dire consequent that it would have on us.

Last season's accounts reflect what actually happened in practice. We made a
healthy operating profit of £2.5 million (reflecting the healthy state of the off-field management of the business), but ultimately we have reported a net loss of £3.3 million. This loss takes account of amortisation of player registrations of £10.8 million, a figure which is inflated as a result of cautious one-off write downs of player values by the Board, a move we felt prudent given the current depressed market conditions.

It may seem strange to shareholders that in a relegation season that the Club can
report such healthy trading figures, however, this is a combined result of the number of live appearances we had on Sky Television, our UEFA Cup run and the strength of our own commercial enterprise and business management.

Had we finished mid-table in the Premiership, a conservative and at the time a
realistically planned position for us having finished fifth place the season before, we would have reported another operating profit of around £5 million, as we did last year.

No company likes to report a loss but shareholders should understand that this is a
'book loss' in accountancy terms and not a 'trading or cash loss'. I am not glossing over this result in any way and I will take questions on the accounts after this address. Nevertheless, our concerns are now necessarily focussed more on the situation today and how we manage our future in very adverse conditions, than they are on last season's financial results.

Last Season - What happened & why
Hindsight is a wonderful thing and all of us in this room can reflect on what we may have done differently.

I want to take you back 18 months to May/June 2001. We had just experienced a
quite magnificent first season back in the Premiership, we finished fifth, and it is amazing to think that on the very last day of the season we were playing for third place and a spot in the Champions League.

George Burley had won both Manager of the Year awards, from both his peers and
the coveted FA Premiership Carling Award. This all to universal acclaim, including our own.

In the months preceding this, George Burley was being touted as one of the hottest
properties in football management and the Board had moved to secure our investment in him and ensure continuity at the top by offering him a lucrative new long term contract.

Last May we had signed the biggest sponsorship in the Club's history with TXU, we
had a waiting list of 4,000 for season tickets, we had won the Fair Play League, Marcus Stewart was the second highest goal scorer in the Premiership, the Academy Under 17s had won their Premier League, we had demolished Churchman's and built the new Greene King Stand and committed to build a new two-tier North Stand with the aid of a £25 million bond (effectively a mortgage) to fund construction without detriment to the on-going investments in the First Team.

Off the field we had a community, commercial and all round business reputation
which was widely acclaimed.

There was a real buzz in the town, county and even across the country - for many
we were the nation's second favourite team. We all lived it — every one of us in this room - everybody - staff, players, supporters, shareholders, local business, and even the press. Heady stuff indeed....

There is a truism in football - that success emanates first and foremost from success
on the field. This Board of Directors has always recognised that fact and within whatever means available to us we have tried to invest the maximum affordable in the team without jeopardising our solvency and long-term prospects. The ultimate choice of new players has always remained with the manager of the day - this is fact is a performance indicator of football management.

While we all recognised that a repeat of fifth place or better would be very hard to
Achieve, the manager, George Burley, felt strongly that he had a too small a squad and that we needed to invest in additional players to bolster our numbers, particularly with the extra games involved with the UEFA Cup. I think this was a view that was shared by most supporters and voiced in the local press.

Ipswich Boards have always given managers time, delegated responsibility and
never interfered with decisions on the playing side nor crucially on inward transfers, other than to offer support as a sounding board, nothing has changed in that regard to this day.

Ipswich managers have always been judged on long term results and sustained
progress, never on short term whims or fickle opinions.

This was the proud Ipswich tradition under Scott Duncan, under Alf Ramsey, under
Bobby Robson and under George Burley.

George Burley's judgement in the recruitment of players had been excellent and our approach in summer 2001 was no different to previous seasons. The Board of Directors backed our manager's judgement again.

The team's success swelled our turnover and so last year the Board offered George a vast and unprecedented £15 million to strengthen the squad as and if - and only if - he felt it necessary.

We realised £6 million in player sales [presumably the combined fees for Richard Wright and James Scowcroft- TWTD], but this was countered by an increase in the
player, manager and coaching wage bill of a similar amount - all in all - adding a £15 million investment in the team on the field of play.

Yet despite this expensive injection of new faces from home and abroad we failed to
avoid relegation. Getting the players proved easier than getting them to play as a winning team.

We had one of the healthier economies in the Premiership and our footballing wages
to turnover ratio was still only 54%. I can further inform you, that out of all the clubs in the Premiership we were 15th out of 20 in the wage table.

The amounts involved may seem horrific today but it demonstrates that we were
competitive at the lower end of the division for the size of club we are. The fable of 'generosity' does not stack up for a club that qualified for Europe.

While you always have one eye on how you would cope with relegation - in ours and
most other cases through player sales - we could hardly contemplate that we would be immediately relegated when we had the current double award-winning Manager of the Year, a talented team that had finished fifth , to whom we had added a further £15 million transfer fee investment - not to forget the increased £24 million wage bill!

But the unthinkable did happen ..... RELEGATION in May 2002 destabilised the Club in cruel fashion in a way that even with hindsight could not have been fully envisaged.

Well-intentioned player investments have been overnight transformed into a legacy of contract liabilities that in total are unsustainable with Football League status.

The crippling gap in income between the Premiership and relegation to Division One
of some £15 million is now virtually unbridgeable, this fact alone being enough to devastate even healthy clubs period. And we were one such club in the Premiership.

I cannot think of any other healthy businesses that would cope with a withdrawal of
50% of their income at a stroke, in an employment market where you are required to provide long-term contractual commitments to staff to protect their transfer asset values.

I now turn to the market collapse and the closed season activity. The sudden collapse of the transfer market turned on its head the wisdom of long term contracts to protect transfer values post Bosman. This will have profound consequences for us and virtually every other leading club in the years ahead as all clubs will struggle to adjust.

As if that wasn't enough, we also had to confront the collapse of ITV Digital which cost us a further circa £3 million of lost income.

In addition, the unwelcome introduction and enforcement of the August 31 transfer
Deadline caused a restriction on player sales to two windows in the year and only serves to strengthen the hand of the buyer to the disadvantage of the seller. It flies flagrantly in the face of FIFA's and UEFA's stated values of solidarity for smaller clubs.

As I mentioned earlier, the Board's strategy to deal with relegation was via player
sales. While we were able to sell Titus Bramble earlier in the close season, other major opportunities quickly evaporated in the face of a market collapse. This led us ultimately to having to accept offers for some of our star players that would not otherwise have been of our choosing, such as our captain, Matt Holland. As everyone knows, the players in question declined moves and come 1st September this year, to be quite candid, we were faced with severe cash deficit.

That left us with a Legacy to be managed. As a result of swift, proactive and remedial action, the good news is that we have stabilised our finances through a mixture of austerity measures, cost cuts, debt re-organisation and deferrals (including our own staff's voluntary wage deferral to whom we are extremely grateful for their support). I am also grateful to our new Chief Executive Derek Bowden and Director of Finance, Mike Cooper, who played a leading role in assisting myself and the Board with these actions.

Although we may have temporarily healed the wound, the permanent cure will take
longer unless we can secure immediate promotion. By the same token we cannot jeopardise our solvency and future existence by gambling irresponsibly on promotion.

I've read recently about our fans being cautious of "men who run football clubs with
an emphasis on business because it will conflict with the wishes of fans". It's hard for supporters who are not in possession of all the facts to understand why the answer isn't "just borrow more" or "gamble on promotion this season" - THERE ARE TWO SIMPLE ANSWERS.

1) This is the real world - bank managers have limits and no matter how compelling
the hard luck story - the answer's NO!

And (2), we took a considered risk last season from a position of strength by supporting the manager's wishes to buy new players.

As we have experienced to our terrible costs - there are no guarantees. Money
doesn't guarantee promotion. There are plenty of other examples, the recent experiences of Wolves being one of the best.

We started the new season full of optimism, we were installed as the bookies
favourites for automatic promotion and there was a general belief both internally and externally that we could bounce back immediately.

Was this an impossible target? Emphatically not! Others had done it before us,
Charlton and Man City being the most recent examples.

We possess a Premiership squad (probably the highest wage bill in Division One), a
strong and loyal support base (just under 20,000 season tickets), and a modernised stadium seating 30,000. The Board had kept faith in George Burley despite our dismay at relegation after such costly inward transfers.

Erosion of self-belief had set in and it was evident for all to see that spirit on the pitch was lacking. After 10 League matches that yielded 12 points out of a potential 30 and four poor defeats, the Board decided to act quickly to rejuvenate the playing staff and give ourselves the best possible chance of still achieving promotion.

The Board, all lifelong supporters, are trustees of the Club. George received our full
backing for nearly eight years and our appreciation is set out in my Chairman's Report [part of the Club's Annual Report and Accounts — TWTD].

Nevertheless, we believe that Ipswich should be a consistently in the Premiership like
Southampton and Charlton, clubs of equivalent size. Disappointingly, George could not provide us with that sustained progress to meet this goal despite time and resources.

In our search for a new manager, while many candidates were considered, we felt that experience and a proven track record were essential to deal effectively with our situation. Joe Royle fitted the bill perfectly. He was excited with the challenge and was our number one choice. We are utterly delighted to have Joe leading our team together with his esteemed right hand man Willie Donachie. I am sorry that Joe cannot be with us tonight owing to the sad death of his father - he has sent his apologies and looks forward to attending next year.

Joe has joined the Club in the full knowledge that he has to generate results from the
very talented squad of players that we possess - those same players who were installed as favourites at the beginning of the season. He is fully aware that a lack of any success will mean we have to sell - that there is no transfer budget - and that any additions to the squad will for the moment have to be on a loan basis only.

It is a very delicate balance to strike, between giving the manager whatever
resources we can to assist in turning the season around to give us a chance of promotion - even if it is via the play offs - and YET on the other hand if we fail to gain promotion then knowing that we will definitely have to raise very substantial monies through transfers as well as by a reduction in our playing squad to cut wage costs.

Because player wages are not publicly disclosed, their effect is often not taken into account by supporters who judge the player investment of clubs. Long-term contracts that protect clubs' investments (as I referred to earlier) become long term liabilities once relegated. Although the £24m wage bill of last year is already substantially down as a result of transfers and loans, there will need to be much reductions for next season if we are not promoted.

In light of the new recession in football, the boot is on the other foot in player negotiations. It will now be easier to negotiate "status payments" for players that reflect the division in which the Club plays.

Indeed we had such clauses with players before we were promoted but regrettably in the climate of extraordinary success that we experienced it was no longer feasible at the time to get players and their agents to agree to such clauses. Other clubs were in the same position - we can all see the writing on the wall now but we were trading in the market place of the day.

The current situation

As a result of the various actions we have taken - coupled with the fact that the club was in a healthy business position prior to relegation - we have steadied the ship and avoided going into administration as was the case with Leicester City.

We remain solvent as we are able to meet our liabilities as and when they fall due and our bankers remain supportive.

Nevertheless the financial situation remains extremely tight and challenging but the Board remains confident that it is a position to manage and secure the company's financial future.

From a footballing perspective we would ideally like not to sell players come January 2003 but given the amalgamation of factors that I am outlining this evening, I cannot rule out player sales - as I doubt, in the current climate, can any non-Premiership club.

Damage has occurred to the detriment of ALL Nationwide clubs and particularly all those who have been relegated from the Premiership, but the Board is working hard to minimise such impact on the company.

It will not have escaped the attention of those more knowledgeable about accountancy that our auditors have referred to the "fundamental uncertainty" surrounding our future affairs in their Audit Report. Although their report is not qualified as such, this fundamental uncertainty relates to a number of assumptions that have to be made for our future financial health, including players transfers, cost savings and the possibility of some form of share or loan stock issue. This fundamental uncertainty is not unusual in footballs clubs, Nottingham Forest and Coventry City being two recent examples of football clubs to have had such reference made in their accounts and there will no doubt be many more in the future.

As regards the question of a share or loan stock issue, the directors are still considering the matter. Clearly there is an element of risk attached to any raising of new capital at the moment although we are aware of considerable support for such a move.

There are substantial costs associated with a public offer of shares and given our current predicament the raising of capital via some form of loan stock instrument with a commercial interest rate attached may be more effective.

One other particular financial point I wish to refer to in this address is our level of debt. The accounts show that we have £31.4m worth of debt and that is a fact, although I have seen it misrepresented in some press reports. An analysis of the situation will reveal that our short-term debt in fact reduced from £7.9 million to £4.9 million but of course we took out the £25 million bond to build the new stands and the training centre.

This bond is effectively a 25 year mortgage with manageable repayments: Long term finance for long term assets. So comparisons with the Pioneer Stand 20 years ago are vastly different. The Pioneer Stand was funded from cash, without a mortgage, and had a major effect on our playing budget in the years thereafter.

This new investment is secured against very cautious attendance levels - not against the value of the ground as seems to be a common misconception - precisely to avoid any major impact on our player budget. This type of mortgage is called SECURITISATION OF TICKET REVENUE and has been adopted by many other clubs apart from ourselves and Leicester, including Southampton and Manchester City.

I hope it is clear that the basis of investment in these new stands is entirely different to what was the case with the Pioneer Stand.

Before I close this address I want to move to the future outlook We have had six years of working our way upwards and one year coming down - almost as though it was a case of snakes and ladders with six years hard toil up the ladders and one year down the worst imaginable snake. Bluntly, we could not have been relegated at a worse time but as a club, we have to be realistic about where we are today.

By realism I don't mean accepting second best - because we have proven that we can compete at the top level, indeed compete successfully in Europe. It is much more a case of how we play the very difficult cards that we have been dealt. It is a balance of passion for the game, the desire for results and success, but with financial realities and the art of the possible.

We must generate greater revenue in a tightening market and we will vigorously challenge costs - especially player costs. But most of all we need to return to the approach that made us successful before.

There is so much good here at Ipswich Town to be proud of, our stadium, our Academy (now widely acclaimed as one of the best in Europe), our Community projects (which puts so much back into local society), which markets the club and underpins our support base, and which takes ITFC to the grassroots of our community). Our fans are truly remarkable, stoic, loyal and recently long suffering fans and they have supported us in huge numbers both home and away, the commercial successes, the enormous goodwill that the Club possesses in the market place, the new superstore, the quality of our pitches and so on and so on ...

And last but not least our recently maligned players: we have a very talented squad
and a new manager who I am convinced can bring the very best out of them - indeed this is already evident. Last night's display at Liverpool was superb and went some way of righting our appalling record against them last season.

So is the cup half full or half empty? For five years it was half full - then for a year it
was overflowing. With relegation some may say our cup is half empty - we have got to change this mindset - I believe it is half full.

We must use the many assets I have just mentioned to propel us forward once
more. It has truly been an annus horribilis but one from which I am confident we can recover but only by sticking together and supporting Joe Royle and his team to the hilt.

My position as Chairman

Before I close, I would like to turn to my own position as Chairman. I have led from the front and feel accountable for virtually everything that happens here whether it is under my control or not. We have had six good years and one bad, but at a grave cost.

It is success on the field that fertilises every other area of the business and the well intentioned investment in certain players in 2001 failed to bear fruit for the reasons I have stated above.

It is appropriate that I am standing for election as a Director tonight. I have regularly stated that I am not a proprietorial style Chairman and I only ever want the best for this Football Club.

In hindsight -we may have acted differently in some cases but it wouldn't have changed the fact that the Board continues to back the judgement of the manager of the day.

Managers take full responsibility for results on the pitch - this is how they are judged and remunerated and this is the primary influence of the success of the Club. Just like each of you in this room, I have felt bitterly disappointed about our relegation but speaking as Chairman, for whatever recriminations over the choice of players recruited, a line has to be drawn..........

We have been most unfortunate to be relegated in cruel fashion. I would continue to use my energy and best endeavours to support Joe Royle in leading us back to better times. It is my responsibility as Chairman together with my Directors with your support to lead this Club forward.

As regards the FA & FL let me dispel one or two rumours! I have not been asked to be Chairman or CEO of either organisation. I may assist at the FL in due course if so required but talk of the FA Chairmanship is very premature as the next election is not until summer 2004.

Also standing for re-election tonight is John Kerr. John is the most experienced director on the Board having served for some 20 years and having been a previous Chairman. I am immensely grateful to him, as I am to all my fellow Directors, for his judgement and wise counsel. John is a stalwart and a tremendous asset to this Club and I hope you will re-elect him as a Director this evening.

Derek Bowden, our new Chief Executive is also standing to be appointed as a Director tonight. I mentioned this last year and confirmed subsequently that it was still important to separate the Chairman and Chief Executive roles and appoint a Chief Executive even if we were relegated.

The Directors decided this should include a position on the Board. Without embarrassing Derek the cost is a fraction of a squad player but the benefits of a well-managed business going forward should financially reward us many times over. His skills will be as necessary in helping us to manage the Club in a tightening market as they will be when fortunes recover. Derek has made an excellent start at the Club and I believe he can have a long and successful career here.

I would like to finish by referring to two icons of Ipswich Town Football Club. Firstly to congratulate Sir Bobby Robson on his knighthood and to the Supporters Club for their initiative and endeavour in the erection of the statue in Portman Road.

And secondly, although we are hoping to retain his invaluable experience in some future capacity, yet to be determined, tonight is the last Annual General Meeting at which David Rose will officiate as the full time Club Secretary. It is a post that he has held with distinction for longer than any other current serving Club Secretary in the land. We will be honouring David appropriately at the end of the season.

We now stand at a critical point in the Club's history. Ipswich Town requires careful and experienced management to steer it through troubled waters. We need to move forward aggressively and positively as a united force. I have spoken about responsibility and accountability tonight but the quicker we can move from a blame and finger pointing approach to an acceptance of our status and unite together in "picking up the mantle" , then the greater and quicker our chance of success.

We have enjoyed success together and I hope that the strength in this Club is that will enable us to stand firm in the face of adversity and move on.

When things go right or wrong, it is of paramount importance that we review properly as we have and will do tonight but at the end of the day that should not be about judgement or blame but about learning and how we can improve from the experience.

Some people think the opposite of right is WRONG. It's not its LEFT. We have
arrived at a crossroad - its time to change direction and raise our game.

Photo: Action Images

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