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. The panel on BT,brushing aside Man Citys breach of FFP rules.Peter Crouch saying “Best thing they can do is win it this year,as a big GIUY to UEFA”.

  2. Have not read many people on here slagging off the Huns.What nearly everybody is saying is that Braga were dire.If you watched the game,you would have to agree.

  3. They thoroughly deserved to win …it should have been 5 nil on the easy chances missed….They will certainly have got a great lift from that game….they will think they are better than they are …We need to be fully focussed on every game…no Complacency no slip ups before meeting them, then match them man for man..and 9in a row is ours ….☘️☘️☘️

  4. FFP is a joke.


    Not as big a joke as geographical lottery mind.



    So if I am a billionaire I cannot pump 100million into my favourite team


    Yet if I am lucky enough to be English…I can scrape my club into the premier league and to start with I now get 150million in tv money for coming in last place..!


    And that is just the start.


    I am using England as the obvious example.


    But in truth it is all about the big 4


    England,Spain,Italy and Germany.


    France and Portugal are kind of in middle land whilst the rest might as well not bother dreaming.

  5. It doesn’t augur well for the quality of a third European competition given what I’ve seen tonight in the Europa last 32.



    I’m just calling it as I see it, Braga were pish. That high line was Sunday park stuff.

  6. thought they looked good tonight well organized and could have scored more.



    must say braga were very poor.






    commentator said there cf (cant remember his name) had four headers at goal, none on target.

  7. Yes we may well know see an improvement in sevcos league form.



    Celtic need to keep the blinkers on and do what they have been doing.


    Many of us [including me] have been guilty of calling the 9th title a bit early.


    Luckily Neil Lennon is far too smart to make predictions before the job is done [like fools like me !]



    Celebrate the league when its won not before then.


    Watching sevco tonight reminded me that they are not as hopless as I thought.


    The will be capable of putting a run of form together.


    We need to keep our standards high

  8. Didn’t see the Huns game tonight, but watched the first half of their game last week and Braga ripped them to bits for the first hour and should have been out of sight



    Neither team is that good

  9. glendalystonsils on

    I see it has started already . One or two headlines on Newsnow (STV , Record) carefully picking words out of Celtic’s statement to make it sound like the club were responsible for the whole thing.

  10. An Dun



    I agree Braga did look pish.



    When that happens to a team who topped their group and recently won at Benfica that tells me Sevco were good and got their tactics spot on.

  11. It was a great result for the huns but Braga, by all accounts were very poor.



    I expect the mini’s to provide a sterner test.

  12. Sid



    They thoroughly deserved the win but Slippy’s tactics does not explain Braga’s suicidal high line or their melt down at Ibrox.



    There’s a few good teams in the Europa but in general, it’s pretty poor stuff.



    We get a kind draw and we can go far.

  13. An Dun



    I agree, we could go far, one man’s meltdown is another man’s great comeback, takes a bit of both imo.



    Anyone clever know what it would take for Scotland’s co efficient to rise enough for an automatic entry to CL?

  14. Lazydinamite



    Spot on. I put up with the foreign team supporters in Dublin all the time



    I’m telling now that Liverpool and Man City need to move to Scotland and that Liverpool need a strong Everton

  15. Despite Paul’s forensic analysis of the finances of the club/team operating at Ibrox Park, SFA and SPL will allow them to continue until they might win the league

  16. 2 ex Celts – Big Moussa and Jason ‘Climate Change’ Denayer in action for Lyon v Juve tonight.

  17. Loads of bottles crashing all over CQN after a truly awful performance from Braga has raised the Huns to another level. That high line was schoolboy stuff, the huns finishing was hunlike and the defending was that pretty straightforward sit deep and watch the ball come in thing.



    Not buying it myself.

  18. Braga very poor Huns started poorly but grew in confidence as game progressed, In the end it was a deserved victory.


    It puts a bit of pressure on us to get through tomorrow night as we don’t want to give them Bragaing rights.


    However we shouldn’t worry about the Huns, it’s all about Celtic as long as our Bhoys keep doing the business, we will be fine,


    p.s. Edmondson is latest 100 million man.

  19. So, if we accept Paul’s leader as being accurate, and the two Champions League spot become available at the end of next season, who gets the Champions League spot?



    Celtic and…. Aberdeen?

  20. Good Evening All,



    From @CGCW12



    So can someone explain to me why @BBCMarkDaly was tasked to report on @RangersFC child abuse scandal and @alextomo was tasked to report on @CelticFC child abuse scandal?



    That is a question that should be on everyone lips.

  21. I know we always say that the Huns are lucky in Europe. I don’t normally watch their games but I watched this one. Braga were awful, you would thought that they didn’t want to win. The amount of times that they passed the ball out of the park was risible.



    Rangers had no brilliant tactics, They also didn’t to do anything to counter any Braga tactics. Their goal was a punt up the park. Kent outran the defence and managed to score when 1 v 1

  22. Have has kept them in league and Europa cup..creates it scores important goals….Jozo should launch him

  23. How the Hun result has any bearing on us winning the league ,is beyond me.If anything it helps us,as they have no free midweek.This is the same team who have been crap since January.See if they bring this alleged brilliance to Tynecastle ,Saturday.




    Good post!



    The huns are still shite by virtue of Braga being worse than that.



    But……….we need to keep our eye on the ball.



    Tomorrow will not be a walk in the park.

  25. To be honest and without sounding ignorant.


    Watched the channel four child abuse in scottish football.



    Although I believe the particular bit about our club is tommorow part two



    But part one was hardly scoop of the decade.


    Yes we found some poor fellow who’s childhood was destroyed by disgusting bastards.


    But I certainly have seen it all before.


    And it certainly happens in every town and city in this country.[UK]


    Just take a close look at your local paper…you will be amazed at some of the disgusting child abuse related stories that get completely ignored by the ‘main’ news.



    My guess is that tomorrow’s part two will produce nothing more than stuff we have already been made aware of in the scottish press.


    Only channel four have decided that it is time to shine a light on Celtic F.C and to their ‘general’ UK viewer base it is not old news.

  26. TURKEYBHOY on 26TH FEBRUARY 2020 6:08 PM





    I have said my bit on Res 12.I support it wholeheartedly,and the Board are shameless in their handling of it.That is no excuse,for every blog that Paul puts up,the subject is raised ad nauseam. Whether you or I ,or anyone else,likes it or not,it is not the most important thing in the minds of the majority of Celtic fans.This is the reality.Winning on the park is what matters to most.Oh,and the scum getting gubbed.




    There is total relevance and connection to what Paul posted re break even and the damage that TRFC continue to do to Scottish football, that goes on unchecked and I’ll take every opportunity to make the connection when it arises.



    That in fact is about the only time I do post on CQN on the matter because I know folk would rather address the issue of winning on the park, until of course we don’t win like on 29th December to a club that fields players it cannot afford, then the core issue Res12 wanted to see addressed ie bad/biased governance gets attention.



    I’ll keep making the point that winning on the park against “Rangers” is related to their unsustainable policies that put all of Scottish football at risk, not just Celtic winning, in the hope that at some point there might be a change of a business model of “Old Firm” dependence that Celtic have no desire to change even though it now risks repeating events in 2012 that have led to the Board’s shameless handling, including deceiving shareholders to their cost.



    I get it that its complicated, I get it that it requires effort to follow. I get it folk just want to talk about the games, until of course we stop winning.



    I want financial FAIR play to make sure that we win fairly and do not lose unfairly. Don’t you or do you not see a connection?