Newconomics: Interest payments 75% above transfer spend


Celtic net financing cost £201k (interest paid minus interest earned), Newco net finance cost £2.997m, that’s 6.25% of their income paying for previous season’s spend.  This percentage is a key metric for distressed companies.  David Murray’s Rangers paid 7.7% of their income in finance costs 19 years ago.  That was clearly unsustainable.  Rangers subsequently converted loans into shares (sound familiar) but were unable to apply a tourniquet on the losses, which eventually led to liquidation.  Newco are walking the same path.

Celtic and Newco both had a reduction in income, minus the reduction in costs due to the lack of fans, of around £9m. Newco state this net loss at “over £10m”, which gives an indication of what they will present in reporting to Uefa.

If we correct the reported losses for the 2020-21 exceptional items, Celtic’s loss is reduced to £2.3m, Newco’s to £14.5m.  The sale of Bayo and Hendry more than covered that trend loss for Celtic, leaving income from the sale of Edouard, Ajer and Hendry for new signings.  Newco’s entire transfer income was £1.7m.  They pay 75% more than this in interest.

When I started writing here about Asset Management, the moans came back about becoming ‘a selling club’.  If you are not selling players at the right time, for the right fee, something else is picking up the pain and you are underachieving.

Signing the finished article is more likely to help you succeed in the short term (although loanee Shane Duffy was 28 when he arrived), but the return on your investment from players purchased at that age is likely to be low.  They have been around long enough for their perceived values to be fixed.  When performances drop, you cannot move them on at a profit and need to cut elsewhere to replace them.

Sales from a hugely underperforming Celtic squad took in £34m transfer fees this summer.  20 times more than Newco’s £1.7m from a title winning squad.  And let’s be clear: before the summer they acknowledged they needed to sell, an admission their accounts confirm.

There is a trade-off: the instant hit or a more strategic play.  Strategic players win more often, that £34m has been transformational to what Celtic have been able to do this season.

How much of your income to pay to service debts inhibits what you can spend going forward.  Not all spending is equal.  Some will perform long-term, providing reinvestment funds after the player has moved on.  Others not so much (we have been there, think of the £6m signings of Sutton, Hartson and Lennon and the chasm when they aged).

Dave King clearly felt slighted by the tone of Newco’s accounts and responded in The Herald today, when he confirmed his £5m loan, plus £832k interest, had been repaid a little over a week ago.  There was an insistence that despite King, Douglas Park and others (let’s call them the Concert Party) saying they would provide interest free loans to the club without taking security, the South African authorities would only allow him to give Newco loans if they were at a commercial rate of interest – 8%, if you don’t mind.

I have no reference point for this kind of insistence.  He does not elaborate on what “authorities” we are talking about, but he has a bit of form in South African, so is perhaps wise to not be too specific and do what he is told.  He also reiterated his pleasure that “the authorities” allowed him to make the loans unsecured.  They sure are involved authorities.

The secured, interest paying, loans from others in the Concert Party clearly irk King, always a man of his word.

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  1. The Rangers will just continue to continue to pretend, that their club will never end (Simon and Garfunkel)

  2. Money finally runs out > liquidation> Shed all debt mentioned above > Pop up as Sevco Pt 2 > New “journey” > Continuity lie maintained > Celtic ‘old firm’ model supports said lie > Rinse, repeat, forever.



    Won’t get fooled again csc.




  3. Paul67 et al



    Of course there is an alternative to “Asset Management” Paul….


    It is called Football Management…..

  4. glendalystonsils on

    BIG WAVY on 10TH NOVEMBER 2021 12:15 PM



    I fear you have got it spot on . What happened in 2012 was not a one off and Scottish football will have learned no lessons from it .



    Old bigots never die , they merely reinvent themselves .

  5. They’ve actually made it easier now to introduce a new version of sevco into the Premiership, will happen almost overnight, por cierto.

  6. If Slippy goes to Villa will he sign Moreorless in the January window for £30 million?



    He’s worth that at least.




  7. Glendalystonsils



    It appears, with Desmond in charge, we need them to sell the “OF” to the English game (our seemingly only exit plan). We therefore must continue with that stance until otherwise briefed by the moustached one. Peering into the Huns accounts is an absolutely futile exercise with that in mind.



    I’d rather know:



    -Where is our club structure currently ? – CEO maybe ? DoF and Head of Recruitment maybe going into January or we expect big Ange to wear all hats still?


    – Where are the revenue lines for us to build upon ? – Hotel ? Partnerships ?


    – Where was the capital projects we feted not so long ago ? – Barrowfield and hotel / ticket office / museum ?



    But hey, look over there everyone. Shiny new Hun debt squirrel appearing instead ?







  8. PeterLatchfordsBelly on

    I know. Those pesky, pedantic South African authorities forcing a huge profit down Squint’s throat.

  9. CELTIC MAC on 10TH NOVEMBER 2021 12:17 PM


    Paul67 et al







    Of course there is an alternative to “Asset Management” Paul….





    It is called Football Management…..



    Would that be the kind of management espoused by Barca,R.Madrid,both Milan clubs.


    Just asking.

  10. Don’t know about the Milan clubs but Barca & Real are both “looked after” by the Catalan and Spanish authorities, very similar to Sevco here, much to the annoyance of fans of other Spanish clubs, notably Atletic, por cierto

  11. turkeybhoy



    Is that the Clubs that have won 28 European Cups between them?


    No, not that kind of football management…




  12. Big Wavy,



    No idea about a new Head of Recruitment.If Ange pulls another couple of crackers in January,to add to Kyogo,Jota,CCV,Juranovic,would we really need one.Our recruitment with supposed experts was not the greatest,being kind there.


    As far as I am led to believe,Barrowfield is a goer.


    Did you really expect,in this time of great uncertainty regards Covid,maybe ground closures again,that the Hotel,Museum,etc,would not have been put on a back burner.


    I think we came out of the Covid crisis very well,and I am delighted with the position our club is in.What transpires in the future,we shall see.

  13. Por Cierto – ” … much to the annoyance of fans of other Spanish clubs, notably Atletic, por cierto”



    Athletic Bilbao have quite a cosy reletionship with the Basque “authorities” (see their new stadium) but I guess you meant AtléticO Madrid (who also have a shiny new stadium with lots of help no doubt from the Madrid “authorities”)



    Corruption is endemic in Spain, it always has been, that’s just the way business is done, unfortunately.

  14. Their financial situation is turned on it’s head , IF they win the seasons SPFL and get the guaranteed income for next seasons CL qualification.




  15. Squintys statement



    FORMER Rangers chairman Dave King has moved to clarify the details surrounding his £5million Ibrox loan.



    Rangers posted a loss of £23.5million in the latest accounts for RIFC plc that were revealed on Friday morning.



    The champions confirmed that a £5million loan had been repaid, plus interest, as Rangers stated: “This has been progressed further since 30th June with additional investment from our investor base to support the funding needs of the Club, including the repayment of Dave King’s £5m loan plus interest of £832k on that loan.”



    King has now detailed the circumstances surrounding that cash facility and, in a statement released on Tuesday, said: “It has been brought to my attention that there is confusion regarding the Club’s recent incorrect statement that a loan plus interest was repaid to “Dave King”.



    “There are concerns that this was a previously unreported loan that had somehow compromised Rangers present financial position.



    “In addition, I was also forwarded two very similarly worded Club linked media posts that queried whether interest should have been paid on the loan.



    “Having been asked to clarify the true position, I have decided that the general release of a statement is the best way for me to do this.



    “The loan that was incorrectly attributed (in the June 2021 financial results presentation) as having been paid to me personally is the original loan that was provided by Laird (a company in my family trust structure) shortly before I announced my intention to step down as Rangers Chairman at the AGM in November 2019.



    “I disclosed Laird’s loan during my Chairman’s statement at that AGM.



    “When seeking approval from the SA authorities, the Club worked with my accountant in SA to provide all the financial information required to support such a loan and the RIFC Board authorised it on the terms that were ultimately approved by the SA authorities.



    “At the AGM in 2019, I expressed regret that the authorities in SA would not allow this much needed loan to be made without it attracting a market-related interest rate – but I was pleased that it was granted on an unsecured basis.



    “The dramas of the David Murray/Craig Whyte/Mike Ashley eras had most damagingly exposed why the “owners” of the Club at any time should never use the Club’s assets to secure their own investment.



    “That ultimately leaves the real risk with the supporters.



    “I was determined that would never happen under my watch and was glad that my fellow directors (at that time) agreed with me.



    “I explained at the AGM that my regret at interest being paid was that it went completely against the undertakings given by me and my fellow directors (at regime change) not to take director fees and not to receive interest or take security for loans provided to the Club.



    “The hardened position of the SA authorities to investment in the Club reinforced the timing of my decision to step down.



    “I had achieved my personal objective of removing the Club from its state of crisis and it had become in the best interest of the Club to be guided by individuals in the UK who, I thought, were capable of taking the Club forward in a normalized manner (covid had not yet happened) and who were willing and able to continue to provide any funds that might be required on an unsecured and interest free basis- and thereby honouring the commitment that we collectively made to supporters and shareholders.



    “At the Club’s request, the Laird loan that I disclosed was only payable after two years and, indeed, was repaid to Laird a little more than a week ago.



    “This is long after the year-end that the Club recently reported on and had no impact whatsoever on the Club’s performance.



    “The payment, including agreed interest, had been recognized in all cash forecasting throughout the prior two years and consequently had no impact whatsoever on the Club’s anticipated financial position.



    “Shortly before the payment was due to Laird, I was approached to consider an extension of the loan period to assist with the future funding of the Club.



    “I advised that it was too late to get approval from the SA authorities to extend the upcoming due date but that I was happy to make application for a new loan – but would require the latest financials for submission.



    “I also confirmed that I expected that interest would still be required by the authorities.



    “The Club never took me up on this offer, which is completely understandable given that Douglas and John have again reconfirmed their prior commitments (as I understand it) to providing unsecured interest free loans.



    “It is essential for supporter’s trust that the commitments made at regime change are never abandoned by those that gave them and it is for that reason that I have made this statement to clarify my own position.



    “On a final note, unless I leave the wrong impression, it is only the directors at the time of regime change that I consider bound to provide interest free unsecured loans.



    “That commitment can in no way be binding on those that came thereafter unless they specifically committed as such.



    “I state this because I was approached last year by the Club to grant permission for loans to be made against the security of Club property- which I understood to be a requirement for certain new director loans.



    “My permission was required because the SA authorities only agreed to the Laird loan being unsecured on condition that no subsequent lender could get better terms.



    “I refused to even countenance such a request as I considered it against the spirit of everything I had committed to supporters.



    “Now that the Laird loan has been repaid the present Board is free to make its own decisions on using Club property as security.”



    Not bad for a 49 times convicted criminal




  16. Correspondent from Birmingham Live, someone who would know is saying the deal has been agreed and Gerrard will sign in the next 48 hours



    The timing of this might be coincidence, it might just be that this was a job he was looking for at a good time for a team in decline, but for SG to jump ship so soon after the disastrous accounts were published does suggest that it’s more than just some Celtic supporters who appreciate the importance of paying attention to their finances f because of the impact it has on their own fortunes

  17. Go tell the Spartim on

    Someone tell the BBC, they’re still peddling the line to sevcoites (ie practically everyone at the BBC) to be quietly optimistic (is this based on information from the sfa and refs that they’ll be looked after with the league), other than winning the league and direct entry to champions league I can’t see what’s to be optimistic about, apparently their lawnmower has been repossessed

  18. Some interesting analysis Paul67. For a company that was supposed to be debt free they do seem to be paying a lot for it.



    Why don’t you see anything like it anywhere else on the internet? It doesn’t make sense to me that nobody else seems to take a serious look at something this important.



    You can be sure that any serious manager will do some looking under the bonnet before committing, though.

  19. onenightinlisbon on

    CELTIC40ME on 10TH NOVEMBER 2021 1:39 PM



    What a huge mistake that will be for Villa. A manager who has failed at almost every turn in Scotland. Not exactly greta credentials to help them escape relegation.



    The MSM will acclaim it as a fantastic piece of business, that is until he gets punted when they go down or fail to reach the high expectations of their board.

  20. TINYTIM on 10TH NOVEMBER 2021 1:16 PM


    Their financial situation is turned on it’s head , IF they win the seasons SPFL and get the guaranteed income for next seasons CL qualification.




    The CL Qualifacation cash will certainly help, TT, but I wouldn’t go as far as saying turned on its head.


    Look at Celtic’s accounts for the last two season’s we were dining at the top table, 2017 and 2018.



    2017 Treble 1 + CL Groups


    Turnover £91m, profit £7m



    2018 Treble 2 + CL Groups


    Turnover £102m, profit £17m



    Load of folk are kidded into thinking that the “£40 million golden ticket” goes straight to the bottom line in profit. I read Barry Ferguson in the Record the other day and his naive comments were proper laugh out loud stuff. BazzaFud thinks that the Ibrox debt would be pretty much wiped out by a single season of CL cash. Our accounts for 2017 and 2018 prove otherwise.

  21. The more you think about it the more you realize how important their failure in the champions league was to the balance of power in Scotland



    SG does seem to have escaped criticism for it but you wonder if they’ll revisit it when they can’t attract a new manager because they have no money to spend and they have to live through several windows of net negative spend



    There is the very real prospect that a new manager, with a squad with a higher wage bill than ours, will do better than Gerrard has this season and increase the gap from the four pints they are ahead after our record-breakingly bad start. But they need to win this league now more than ever, the pressure on the new guy is going to be incredible and with no cash to strengthen in January, who’s going to want to want that?

  22. The difference in CL and Europa money is the same as their losses in one year



    It keeps them above water, nothing more



    We’ll still make a good profit this year with Europa League football

  23. Great to hear AP was at The Tommy Burns Story at CP last night, obviously trying to find out about our history, and understanding a bit of what we are about.

  24. From FF, rage being countered with optimism like this:



    “Managers around Europe will be queuing up to apply. Which makes me less anxious for Rangers post Gerrard.



    We’re a massive club, with expectations to win trophies on a regular basis. Couple this with our extraordinary fanbase and you will have managers posting off their CV’s as we speak.



    This isn’t without mentioning a chance at managing in the Champions League, which is always a massive pull. That is any managers dream.”

  25. VALE BHOY on 10TH NOVEMBER 2021 2:02 PM



    It was a two year loan with interest at 8% added to the 5m at the end of the first year. At the end of the second year the interest was calculated on that

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