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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  1. Celtic Statement



    Competition banner






    By: Newsroom Staff on 26 Feb, 2020 16:41




    In light of recent speculation and to seek to avoid any confusion, the Club wishes to confirm its position regarding the historic abuse that took place at Celtic Football Club and Celtic Boys’ Club. Celtic Football Club is appalled by any form of historic abuse and has great sympathy for those who suffered abuse and for their families. The Club is very sorry that these events took place. The abuse of young people is an abhorrent crime. Unfortunately it has affected many areas of society.



    With regard to the allegations regarding historic abuse at Celtic Boys’ Club (which, so far as we have been made aware, relate to the period prior to 1997), although Celtic Football Club is a separate organisation, we take these extremely seriously because of the historic contacts between the two organisations. Police investigations were given support, so as to seek to ensure that those individuals who abused young people were brought to justice.



    The Club has been at the leading edge in Scottish football of putting welfare and safeguarding protections in place for our young people and continues to work with Scottish football to make it a safe place for young people.



    These are very sensitive matters. There are ongoing legal proceedings which prevent us from discussing any case in any detail. It would not be appropriate for the Club to comment in the media about any individuals or events.



    In summary, these are historic issues, which the Club is dealing with in a responsible manner and in conjunction with its advisers. The Club reiterates its sincere sympathy, regret and sorrow for those affected. As we have said repeatedly, the Club will stand by its responsibilities, respecting the due process of law

  2. Just watched a few seconds of the Hun game. Enough to make me feel a thorough dislike for Scott Arfield. Is he really Canadian? To me, he looks and behaves like the stereotypical Hun

  3. Braga have been awful so far, one paced and holding a high line at the back which looks somewhat suicidal.

  4. TURKEYBHOY on 26TH FEBRUARY 2020 3:35 PM


    Fantastic article ,Paul,the print out needs to be sent to UEFA.Its amazing what people power can do.Re,the Huns bombarding every media outlet in the country,about abuse at Celtic,hoping,someone,anyone would bite.Step up,Channel 4.Might not be highest profile,but our media will make sure it is.A couple of hundred letters of complaint sent to UEFA,with a similar amount sent to friendly,journalists,probably not our mainstream mob,could maybe give a journalist with a view to making a name for himself,a wee story to break.





    Man City,should also be contacted.They do it,why should’nt we.Probably far too many more concerned with Res 12,instead of attacking the REAL enemy.




    With respect Res12 was about giving Celtic the opportunity to attack the real enemy .


    In fact the requisitioners went to UEFA with questions about licensing that Celtic wouldn’t and as a result got information that allowed further questions and information to be obtained then used to build a case that the licence granted in 2011 was by deception.


    It’s not Res12 that is failing, it is Celtic’s refusal to bring the matter to conclusion.



    That is why Res12 continues and only Celtic can bring it to an end by explaining why they have not asked UEFA to intervene and exactly how it is in Celtic’s best interest to allow a false construct persist as that false construct,as Paul points out, is in danger of imploding on itself precisely because it is false.


    Rangers arent the Rangers of pre 2012 yet seem doomed by the pretence that they are.

  5. The hands cant hit what the eyes cant see on

    Amazing the amount of teams in Europe that Sevco make look average. Their performance in Europe has been nothing short of extraordinary considering 2 years they were knocked out by the 4th best team in Luxembourg and we had Pedro arguing in a bush.

  6. Two absolutely crap teams …how are they both in the same competition as we are..considering the teams we have been paired with….this is primary school stuff…apologies to our primary kids….

  7. notthebus on 26th February 2020 5:32 pm



    I sincerely hope we get Braga in the next round.



    Our forward line would have a field day




    I’m not watching, but sounds like we’re more likely to get the huns. They’ve pulled off some decent results away from home in Europe this season.

  8. Auldheid,



    There is only one enemy to me.I don’t care if it’s the old entity bearing that name,or the new one,they are the enemy.Bigoted,sectarian,scum,and no matter what you or others think,our Board,PL,or whoever else takes your fancy, are not my enemy.

  9. No Bobby Does It Petta on

    Huge panic on the match thread over on FF.



    Sectarian singing coming through loud and clear on both telly and radio. Fans dreading repercussions.



    Assume UEFA delegate will be at the match?



    Hopefully he knows what to listen for.

  10. Brags,weak in the tackle,defense very poor,no threat going forward careless in possession,don’t look if they are at all up for it.Thats their good points.

  11. The hands cant hit what the eyes cant see on

    Sevco do have a knack for making teams look average. Maybe their tactics force teams into mistakes and looking average?



    This Braga team has beaten Porto (twice) and Benfica since the new year.