Newco FFP and perilous finances. Here we go again


In  light of Manchester City’s ban from Uefa competition for breaching club licence and Financial Fair Play Regulations (FFP), I thought it was time we visited a related issue closer to home.

In June last year, Rangers International Football Club (RIFC or Newco) held a General Meeting to approve the conversion of shareholder loans into RIFC shares.  Page 10 of the subsequent prospectus noted, “The Loan Conversion will significantly improve the balance sheet of the company and ensure it complies with The Uefa Financial Fair Play Regulations.”

The debt conversion was necessary for the club to comply with Financial Fair Play Regulations.

What is allowed under FFP?

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) can be deducted from your 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 covers the three seasons before the most recent, or current, season.  This summer, clubs under monitoring will submit information on seasons 2016-17, 2017-18 and 2018-19.

In their most recent annual report for the year to 30 June 2019, Newco reported two share issues during that period.  These allowed £16.6m of investor loans to be converted into shares and raised £1.6m cash.  The report noted that after the year-end, “£17.2m of investor loans were converted” to shares.  That is a total of £33.8m debt converted to shares, or €40.4m.

While this helped Newco pay bills, only €30m of this loss-fueled debt-to-share conversation can be considered for Uefa Financial Fair Play purposes.

Newco have run an operational loss for each of their seven years.  That loss has been substantial for the last two seasons, 2018: £14.341m, 2019: £11.277m.  It is very likely they will return another significant loss this season, however, they have little headroom if they want to comply with Financial Fair Play regulations.

In the graph below I have noted Newco’s financial position for the two seasons to June 2019.  Figures for net loss and depreciation are in their accounts, I have (generously) estimated their spend on youth development at £1.8m.

After depreciation and youth development costs are subtracted from losses, Newco made an FFP loss of £18.860m across these two seasons.  This converts to €22.531m, which, after the maximum allowable debt-to-stock transfer, leaves them headroom to run a loss for FPP this season of €7.469m, or £6.251m, lower than the £7.942m FFP loss they made last season.

There are a few items to consider when comparing last season’s position to this season and any on-going matters:

This season has at least one more Europa League home tie.

Ryan Kent and Filip Helander deals make this season their highest ever transfer spend.

In July, Sports Direct won a court case against Newco.  The liability could be anywhere between £5m and £10m.  This ruling happened post-year-end and no contingent liability was not noted in the accounts.

They have a liability for breach of contract, which they admit, over abandoning plans for a Memorial Garden for the Ibrox disaster. The hearing to settle the £1.3m claim is due in court in March.  Again, no contingent liability appears in the accounts.

As CQN reported last week, Hummel rescinded their agreement with Newco (resulting in the Hummel Training Centre branding disappearing this week) and commenced legal proceedings.

By the time Newco report on season 2019-20, which will not happen until July 2021, the costs to settle these legal claims will be established.

A few points are clear:

Newco face a serious challenge to meet Financial Fair Play regulations for their trading during the current season.  It is likely they will need to sell players, possibly before their 30 June year-end, if they want to avoid punitive repercussions.

Rumours have existed about fresh investment from the Far East for many months without anything so far materialising.  There is nothing to stop fresh investment to fix the roof or install a hover pitch, but new share capital cannot fund more football costs and count towards their FFP trading position.  There can be no new money for football purposes.

This is the end of the road for debt-fuelled football for Newco.  If they want to compete in Europe, they have to live within their earnings – that means significant downsizing – without delay.

At the AGM on November, Dave King alluded to fresh investment, in part to assist during the January transfer window.  Any prospectus would need to acknowledge the various contingent liabilities facing the club, as well as the reality that they have run out of road when it comes to investing debt or share capital in the playing squad.  The phrase, ‘Rangers International Football Club PLC Prospectus’, which I think is Ulster Scots for ‘Bend over and touch your toes’ has not been uttered since the AGM.

What is likely to happen?

Clubs that are not compliant with FFP are not automatically excluded from European competition.   Uefa state: “Non-compliance with the regulations does not mean that a club will be excluded automatically, but there will be no exceptions. Depending on various factors (e.g. the trend of the break-even result) different disciplinary measures may be imposed against a club.”

The governing body recognise the variable nature of football revenue and, as long as the “trend of the break-even result” is consistent with FFP, they can “take a rehabilitative approach… with numerous restrictive conditions”.  There are seven lesser disciplinary measures open to Uefa than exclusion from competitions.

Newco’s trend has been consistently loss making.  Even if they were given lesser punishments, such as a fine and agreeing to take rehabilitative action, the consequences on the football field will be the same: this is the end of debt-fuelled football, the party is over, get rid of your high-earners and live within your means……as it should have been from the start.

What living within their means looks like, when the various legal liabilities have to be paid, is difficult to imagine.  Dave King got a standing ovation when he gave his valedictory statement at November’s AGM.  I cannot help but think he somewhat underachieved.

I started CQN 16 years ago to explain football finances, why Rangers spending was unsustainable, that they would inevitably crash and burn, and that Celtic needed to follow a different path. Eight years later, Rangers were liquidated, predicted on these pages before anywhere else.  The prognosis for Newco is perilous, they even have the same compliant media fearful of running the Hummel story.

Here we go again!

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    So what exactly is this “different path” and how do we get there when the people at the club can’t see beyond the old firm?



    As for Rangers getting liquidated – does anyone actually even bother anymore to pretend that they don’t see Sevco as being the same club?



    Is everybody so excited about 10 in a row to beat a dead club’s record? Maybe it’s all about the bragging rights over a club with NO titles? Or over the Celtic supporters from the seventies? Hmmmm….



    “Here we go AGAIN”????? Says it all!






    The follow up from the Celtic point of view is to ensure the club should lobby for the rules to be implemented properly. If that means fans have to lobby the PLC then so be it.



    Awful lot of articles lately about an eight year old club .





    The relevance of the goings on at The Death Star are that they provide us with a salutary lesson of what can happen.


    If we do not learn from these lessons , we may some day make the same mistakes.



    I am delighted that Paul67 continues to explain football finances to those of us who have difficulty with ‘hard sums’



    I am also delighted that Sevco continue to illustrate the perils of such an approach by ignoring historical example.



    “The history book on the shelf


    Is always repeating itself.”



    The Onlooker

  3. Paul67 et al




    Thought I would have a quick look at the Financial Fair Play rules on the UEFA site.


    116 pages! I’ll take your word for it Paul.

  4. Garngad to Croy on

    If the FFP rules are in the first instance administered by the SFA then it will be ‘ Move along Timmy, nothing to see here’



    They will quite happily throw the whole of Scottish football under a bus and risk a ban on all Scottish teams including the national team.

  5. ERNIE LYNCH on 26TH FEBRUARY 2020 1:22 PM


    Any update on what is happening regarding Sky?



    Or is that all finished with, like Res12, the 5 way agreement etc?






    Curious, what’s your expectation regarding Sky?



    Ofcom the regulator will not investigate.

  6. Paul 67



    Right on cue but there is a going concern hurdle to overcome too as I posted on SFM last night.



    “However the problem this licensing cycle now more or less underway might be two fold.



    Either getting past Art52 ” going concern” requirements (which I cannot copy paste) or the break even rules Articles 58 to 64, none of which I’ve tried to apply to TRFC’s situation but against which they should be tested by SFA .



    I think CQN might be looking into this aspect as the licensing cycle will be underway to be completed by the end of May. ”



    My beef though is Scottish football had no foresight then or appetite since to do what UEFA can now do and that is apply FFP as a condition of the 5 Way Agreement.



    Short sighted and something I had hoped Res12 would have provided the leverage for Celtic to push for the good of the game, but perhaps was made impossible by signing up to the 5 Way.



    The universe is unfolding as it should but a bit of foresight might have made it less painful.

  7. Surely winning ten in a row would beat our record which they equalled whilst being fuelled by EBT’s?

  8. SNS group photos of training show Scott Brown has taken part in full training.



    No sight of Ntcham unfortunately.

  9. timaloy29 on 26th February 2020 1:40 pm


    ERNIE LYNCH on 26TH FEBRUARY 2020 1:22 PM



    Any update on what is happening regarding Sky?




    Or is that all finished with, like Res12, the 5 way agreement etc?








    Curious, what’s your expectation regarding Sky?




    Ofcom the regulator will not investigate.








    timaloy29 on 26th February 2020 1:40 pm


    ERNIE LYNCH on 26TH FEBRUARY 2020 1:22 PM



    Any update on what is happening regarding Sky?




    Or is that all finished with, like Res12, the 5 way agreement etc?








    Curious, what’s your expectation regarding Sky?




    Ofcom the regulator will not investigate.









    By CQN Magazine on 16th February 2020



    ‘CELTIC have declared a truce – for the time being – in their ongoing situation with Sky Sports as they prepare for today’s Premiership meeting with Aberdeen at Pittodrie.


    The High Noon encounter will be shown live by the satellite channel and the champions have decided to re-engage with the broadcaster, according to a report in the Sunday Mail.


    However, the Parkhead club are still pursuing concerns over the controversial Alfredo Morelos interview which sparked their initial decision to cease co-operation with the sports programmers.’




  10. PeterLatchfordsBelly on

    A thoroughly agreeable read at any already happy juncture.



    I did wonder when it would eventually hit the fan again. They never learn. Their supremacist mindset precludes it.



    My only concern is how much, if any, authority dies UEFA delegate to national FAs? As we know from bitter experience, the Scottish FA will bend all and any rules to preserve a ‘Rangers’.

  11. Losses of £14m ,buy a player for £7m,at the AGM ,they admit that they need £10m to see the season out.What other country would this happen in? What have the SFA/SPFL done about it? Nothing, as they are terrified of the huns.

  12. So in summary, today will be Sevco The Rangers* last game in Europe for quite some time…………..

  13. auldheid



    I have never placed a whole lot of faith in shareholder revolutions, but they do tend to be more peaceful than the real ones to be fair. That said the fact is we know now, the 5WA not only precedes Resolution 12 it supersedes it.

  14. Paul 67


    It’s all very well laying out the facts – but is anything actually going to happen. A bit like Res12 where our board were presented with a slam dunk to nail the SFA and turned a blind eye.

  15. When are the interims published?



    Great article, another very important story that nobody else seems to be interested in.



    A ban from European competition is the final sanction, it’s only been applied when clubs have willfully been in breach and after warnings and previous punishments. Or been caught cheating. The huns won’t be massively, reoeadtemy in breach, unlike Milan, but will need to cut their costs or they will reoffend, which mean they’ll be walking a tightrope.



    Given that their survival seems to be dependent on European football it’s incredible that they’ve mismanaged themselves into this position. You can only imagine they’ve gambled the lot on CL qualification to give them the huge boost in revenues that they need. They’ve got themselves stuck in a downward spiral, it would take something monumental to pull them out of it.

  16. Robinbhoy



    The hun 9iar was not during the tax evasion period. They were financially doped by running huge losses and pushing them up to MIM (their shareholders agreed) but there was no FFP then.



    Tainted titles for me were post 2001 (i.e. 2003, 2005, 2009, 2010, 2011). Even at that, we really should have won in 2005 and 2011 on the park.



    our first 9 was in a competitive league so i think doing 9 again is great as a record but we really need 10 bearing in mind the dearth of challenge over the last few years

  17. GENE on 26TH FEBRUARY 2020 2:14 PM


    Paul 67



    It’s all very well laying out the facts – but is anything actually going to happen



    Yes, it’s Uefa and not the SFA who’ll be investigating breaches of their regulations. They investigate and punish clubs that are in breach.

  18. timaloy29 on 26th February 2020 2:13 pm



    To do what they were supposedly going to do before Ofcom were involved.



    Demand a detailed explanation about what happened, insist that the individual(s) involved are identified and disciplined appropriately, and assurances obtained that there will be no repetition.



    Failing which no cooperation whatsoever beyond what is contractually required, and lawyers to review whether Sky’s behaviour justifies breaking all ties.



    Sky are not in a strong position here. They’ve paid over the odds to get exclusive rights to a one horse race. Probably not what they had bargained for. The last thing they need is for the dominant club to be refusing to play ball with them.

  19. Is it the end of season 20/21 that potentially Scotland has two teams eligible for CL football? If so, that could be a lifeline for them

  20. Meanwhile back at the ranch….



    “James and Scott are both fit. Oli isn’t fit and will be out for another week. Having Scott and his experience is a confidence boost, and we know that Jamesy is a big game player…”

  21. Any downsizing or sanctions for Sevco won’t be applied until next summer at the earliest. They will roll the dice once more this summer. Anyone expecting them to be hamstrung for next year will be disappointed, imo.

  22. Oh dear….the day just gets funnier…



    Kilmarnock strike club-record kit deal with Hummel



    The Scotsman·54 mins ago

  23. Great article Paul, plainly put and explained.



    I have something that’s bothering me though, perhaps someone on here can put me right.



    If, as you say, that they have no chance of clearing the rules for financial fair play this season’s end, then why did they spend that money in the transfer window at the start of the season. It couldn’t have been to gain a chance to enter the CL by winning the league, as you say they’d fail on the FFP rules, and it couldn’t be they expected someone to come in and take over and clear the debt because they had a shot at CL football, again, as you say, this is something that cannot be done. So why? why did they do all this at the start of this campaign knowing that it falls below FFP by a mile? I can’t quite follow that. I know it’s DK and Sevco, but even the other directors, those who have converted their shares, surely had seen the folly of this expenditure, for absolutely no return whatsoever…. por cierto.

  24. Siempre Celtic (formerly Traditionalist88) on

    …the result of a ‘rigorous selection process’, in their own words.



    Meanwhile, a rigorous scraping of the barrel is happening over at Ibrox…




  25. !!Bada Bing!! on 26th February 2020 2:41 pm


    ‘Ireland v Italy egg chasing cancelled’







    Postponed I think, albeit indefinitely.



    It will be interesting to see how many Italians will travel over anyway.

  26. I think they’ll have to play Ireland Italy some time in the rugby.



    Otherwise, that’s a 5 to 10 million Euro hole in the IRFU’s budget.

  27. Siempre Celtic (formerly Traditionalist88) on

    Any more Serie A matches cancelled?



    Nightmare trying to fit a number of rounds of league games in…