Two weeks ago, in the State of the Club Report, I noted, “What happens in [Newco’s] qualification tie against Malmo and if they progress, in the subsequent play-off round, will go a long way to determine how competitive the league race is over the next decade. It is the sting in the tale of losing such a momentous title.”
The next decade’s power within Scottish football is what last night’s result is all about. To explain why, let’s look at what is allowed under Uefa’s Financial Fair Play (FFP) rules:
Clubs are allowed to lose €5m each season without breaching FFP. Some costs are deductible: spending on youth development and depreciation (often incurred to improve facilities) are deducted from your FFP loss. In addition to this, clubs can convert up to €25m debt into shares, raising the maximum allowable loss for any period under consideration to €30m.
The monitoring period for FFP in normal times covers the three years before the current season. In response to the current crisis, Uefa amended the reporting period for season 2019-20 to cover two seasons (2019-21), so currently, the FFP reporting period is for seasons 2017-18 until 2020-21. Uefa also permitted crisis-related costs of revenue falls would be recognised, so clubs that are normally run prudently will not be penalised due to the mess the world is in.
Newco’s most recent accounts are for year ending June 2020. Figures for the season just ended have not been published yet, but they were obliged to report their figures to Uefa at the middle of last month and are due to report again to Uefa in October.
See graph below:
I calculate three of the four FFP years show a cumulative loss of £32.76m. This converts to €38.657m. Unlike Celtic, Newco did not offer season ticket holders refunds for season 2019-21, though there will be some crisis-related loss of revenue, I estimate no more than £500k.
To align with FFP requirements, Newco would have to have made a profit after adjusting for the crisis of around £8m last season. That did not happen. It is more likely that their adjusted figure was between the trend of £11m loss and £15m loss.
All of this crystallises now. Champions League revenue would have resolved this, but now they are in breach, and will be required to come into compliance if they wish to compete in European football.
So what happens next? Uefa will investigate Newco’s financial housekeeping on receipt of the figures submitted last month. This will be reviewed in October, allowing Newco to downsize and come into compliance during this transfer window.
If they do not come into compliance, Uefa will offer a Settlement Agreement. The most relevant recent example is Milan, who were in breach for the monitoring period, seasons ending 2015, 2016 and 2017. Uefa offered, then imposed, a two-year European ban in 2018. Milan appealed to CAS, then in 2019, the club accepted a compromise one-year ban.
Other remedies short of a ban are available and have also been used. These always include a transfer ban and reduced European squad size, and are only permitted when strict measures are taken to bring the offending club into compliance. The process can be lengthened by appeal, so Newco can choose to bury their heads in the sand and compete for the title this season.
This latter possibility is dependent on them continuing to raise money. Between November last year and June this year, Newco issued share capital on 10 occasions, giving the impression of a business living very much hand to mouth.
With Europa League revenue, everything else being equal, I estimate their loss for this season will be around £15m. If they fail to reach the Europa, that figure will rise to a £25m loss. That’s a lot of BMW sales.
I started CQN in 2004 because there was financial madness going on at Ibrox and many Celtic fans were asking why we were not working with the same gusto. For 8 years, I predicted Rangers would crash and burn before they eventually did. I predicted this would lead to a Generation of Domination – which it did.
Those were tough years in the Celtic financial blogging scene as we lost leagues and trophies to an outfit that seemed to always survive. Like Oldco Rangers, Newco are playing casino football. They run huge losses in order to become competitive. If they lived within their means, they would have finished nowhere near the top of the table last season.
The predictions I made for Oldco were always likely but never certain. We have followed Newco’s accounts for years. The direction of travel was clear, but a team that was a goal up and comfortable against 10 men at halftime last night, blew their chance of competing for a £40m lifeline tie against a side from Bulgaria.
On the turn of a 4-minute spell last night, the world changed. Football is a fascinating business; the complexity of risk is incomprehensible. If you think it looks easy from the outside, you are almost certainly missing a huge part of the plot.
And permit me another point, if a grinning Jon Dahl Tomasson knows all of this, why do you have to come to CQN to read about it? We are talking about publicly available information here, noted in Newco accounts and prospectuses. A decade on and again, the mainstream are sleeping while the biggest story in football unwraps.
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THE BLOGGER FORMERLY KNOWN AS GM on 11TH AUGUST 2021 1:37 PM
The only problem I have with today’s missive is that it relies on rules to be enforced. Usually they are bent, changed or ignored when it comes the Huns. Given its an external governing body tasked with applying them without fear or favour provides some hope.
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Your above final paragraph says it all. It is not the ‘letter of the law’ that matters, but the enforcement thereof.
In comparison with the likes of the top Italian clubs, Real & Barca, PSG…etc, will the relative “paltry” sums from down Ibrox way even register on UEFA’s radar?
Covid will ‘muddy the water’ in the next few years – relying on a ‘significant’ event at Ibrox is more wishful-thinking than reality…..in my opinion.
Rest in peace Robinbhoy
SCUDERIA VERDE on 11TH AUGUST 2021 1:47 PM
JHB I share many of your sentiments but surely if UEFA have the resolve to apply FFP to a club like AC Milan they can deal with the Newco? The Covid situation may play a part but it seems there are allowances made for that within the process.
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Thank you for your reply – can I refer you to this:
JHB on 11TH AUGUST 2021 1:51 PM
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Due to my stupidity and Celtic’s less than clear ticket sales information, I’ve an adult and two concessions spare for Thursday’s game for Lisbon Lions corner,
After we went out narrowly to the Danish champions, the BBC talked about a crisis at Celtic. Now that the Huns have been beaten home and away by the Swedish champions the least I expect is a headline about Rangers (sic) in crisis. Well, actually I don’t expect it.
https://www.bbc.co.uk/news/uk-scotland-glasgow-west-58162767
Well played Police Scotland.
A so-called 3 month enquiry yields the square root of bugger all.
Should we be surprised?
Some of the rank and file are convicted sectarian bigots.
Some are Sevco supporting law breakers.
At least one labels us “puddle drinkers”
While a senior plod with a strange handshake opines openly that some R&F may think certain things but you just can’t say them anymore.
Over to you Crimestoppers.
SAINT STIVS on 11TH AUGUST 2021 12:18 PM
only predicting a £15m loss Paul, I was figuring more than £20m.
Me too – their wage bill and amortization costs have increased by over 5m since their last published accounts when they lost 16m in a year when they did very well in the Europa
Terrible news about Robinbhoy, he’s in my thoughts along with his family and friends
JHB – even without enforcement, last night was a ‘significant event’ already.
At the very least is prevents them from strengthening IMHO. If they have to sell one of their decent players, all the better. Last night will have consequences, regardless of FFP.
JHB on 11TH AUGUST 2021 1:04 PM
“There is no large institutional debt extant”
Do you expect anyone to take you seriously after your zero debt howler recently? You said, without any qualification that the Huns would reach the start of the season debt free. It took 5 minutes to prove you didn’t know what you were talking about.
You have no idea what the Huns owe HMRC or other creditors. Neither, conveniently do you know what they owe other football clubs, which apparently isn’t debt.
Read the article. The world has changed since 2012 there are other factors in play other than administration. The Huns must cut their losses or they’ll be banned from playing in Europe. And we enter into one of Dave Kings house of cards situations that you seem to be so keen to tell us about
They can’t keep on funding losses with debt for equity swaps. They need to sell players and cut costs.
CELTIC40ME on 11TH AUGUST 2021 2:17 PM
You have no idea what the Huns owe HMRC or other creditors.
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Quite frankly, neither do you.
Perhaps you would like to itemise the Ibrox current institutional debt and then we could all be the wiser.
We will not have long to wait to see if Paul’s thesis is correct – transfer window closes in 3(?) weeks. They need to start shifting players pronto (August 26 is the last Europa qualifier so maybe they hold on to them until then followed by a fire sale).
If they start strengthening we’ll know their tactic is to ignore/stall UEFA and they are going for broke to gain automatic qualification next year.
JHB on 11TH AUGUST 2021 1:51 PM
THE BLOGGER FORMERLY KNOWN AS GM on 11TH AUGUST 2021 1:37 PM
“In comparison with the likes of the top Italian clubs, Real & Barca, PSG…etc, will the relative “paltry” sums from down Ibrox way even register on UEFA’s radar?”
So on the one hand You bow to Paul’s greater knowledge on such matters and on the other you’re saying he’s wrong
What qualifies you to contradict Paul?
Maybe you could go through the list of clubs who have been sanctioned by Uefa for non-compliance – you might find they have a history of punishing much smaller clubs than the Huns.
So sorry to hear of ROBINBHOY’S passing.
May he rest in peace.
Prayers said for his family.
THE BLOGGER FORMERLY KNOWN AS GM on 11TH AUGUST 2021 2:22 PM
They were banking on participation in both years. Even with qualification next year they’ll need to cut costs and sell players
One minute to find.
https://www.uefa.com/MultimediaFiles/Download/OfficialDocument/uefaorg/FinancialFairPlay/02/24/58/35/2245835_DOWNLOAD.pdf
Sorry to hear about the passing of RobinBhoy. YNWA.
My friends in Celtic,
On a short break for a few days in drenched Pitlochry. Currently at Blair Castle.
Fascinating if you like history. Talking formidable Scottish females. Does anybody know who Kitty Ramsey was. ? I must confess I didn’t.
The Red Dutchess.
Sorry for the non Celtic post.
HH.
So sorry to hear about Robinbhoy,
Condolences to his wife, family and friends. Another one gone too soon. RIP.
Once, and only once, have the huns suffered the full consequences of their financial mismanagement. Even then they managed to get the history books rewritten. Other than that they wriggle out of every conceivable problem that comes their way while always managing to place the blame elsewhere.
I won’t hold my breath waiting for their comeuppance.
THE BLOGGER FORMERLY KNOWN AS GM on 11TH AUGUST 2021 2:22 PM
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Couldn’t agree more – the “proof of the pudding” etc.
We have all witnessed that the ‘normal rules’ of finance don’t seem to apply down Ibrox way over recent years – how do they do it? Having a queue of eager and well-heeled supporters ‘coughing-up’ seems to be the answer – what do we know?
RIP ROBINBHOY
JHB on 11TH AUGUST 2021 2:21 PM
“Quite frankly, neither do you.”
No, and I don’t claim to. I wouldn’t make a grand statement about it unless I could back it up
“Perhaps you would like to itemise the Ibrox current institutional debt and then we could all be the wiser.”
I don’t know and neither do you, unless you’d like to prove it. The prospectus for the recent share issue does document some borrowing from a couple of financial institutions iirc. Start there
No T in Duchess Greenpinata,
Anyway hadn’t heard about Kitty Ramsey, are you going to enlighten us.
CELTIC40ME on 11TH AUGUST 2021 2:23
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No contradiction of what Paul clearly lays out, just a question over UEFA’s willingness to implement the letter of the law against smaller nations, smaller clubs and for much smaller sums, in the wake of Covid ramifications. A fair hypothesis methinks.
JHB on 11TH AUGUST 2021 2:35 PM
“what do we know?”
Apparently quite a lot
I had a drink with Robinbhoy in Babbity’s many moons ago.
Tragic news that he has passed. May he RIP
JHB on 11TH AUGUST 2021 2:41 PM
No contradiction of what Paul clearly lays out, just a question over UEFA’s willingness to implement the letter of the law against smaller nations, smaller clubs and for much smaller sums, in the wake of Covid ramifications. A fair hypothesis methinks.
You completely contradicted what Paul said would happen.
You should test your hypothesis by simply looking up what uefa have done in the past regards smaller clubs. If you could show an unwillingness to sanction clubs who breach regs to the same extent it might suggest you aren’t making it up. Paul used previous examples to make his point, you seem to be making it up to support your argument
CELTIC40ME on 11TH AUGUST 2021 2:39
No, and I don’t claim to.
I don’t know and neither do you, unless you’d like to prove it. The prospectus for the recent share issue does document some borrowing from a couple of financial institutions iirc.
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Then why such a dismissive response.
There is no evidence in the public domain of institutional debt – if, and when there is, I will change my viewpoint in the light of it. If you have any let me know.
AngelGabriel – thank you for post about Robinbhoy.
Sad news.
One of us.
Rest In Peace.
bounced out again
Robinbhoy, RIP. You were always someone whose contribution to CQN I always read.
My condolences to his wife, family and friends.
JHB on 11TH AUGUST 2021 2:47 PM
“There is no evidence in the public domain of institutional debt – if, and when there is, I will change my viewpoint in the light of it. If you have any let me know.”
The prospectus for the recent share issue shows a loan agreement with Bennett, Johnston & Woldhart for £5.2m with 6% interest & secured against Edmiston House.
GREENPINATA
Was she that Jacobite wummin? There was a programme on telly about her not so long ago .
GREENPINATA on 11TH AUGUST 2021 2:32 PM
Spanish Civil War?
There’s another loan from close brothers as well
CELTIC40ME on 11TH AUGUST 2021 2:46 PM
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I make up nothing.
I merely question, not rule out, the willingness and appetite of UEFA to come down hard during a period where Covid has had such a massive effect on the finances of many clubs.
Governments the world over have ‘binned’ their strict fiscal rules in order to ‘stay alive’ during this unprecedented times. Some clubs may argue that they have only done likewise.
Rest in peace Robinbhoy.
Terrible news.