Uefa meeting, Celtic finances
I want to take a look at what Uefa might do this week that could have an impact on others, as well as our finances. Expect lots of news from Uefa, who have a videoconference on Wednesday and Thursday. We should learn how last season’s Champions and Europa Leagues will conclude, what next season’s qualification competition will look like and the calendar of dates for next season, with guidance on transfer windows.
A relatively minor point with more bearing in Scotland will be discussed on Thursday, how Financial Fair Play (FFP) will be enforced with respect to the crisis. You will remember we discussed Newco’s position with respect to FFP in a lengthy article in February. Without revisiting detail, the scenario required them to sell significantly before the 30 June financial year end to prevent them breaching FFP regulations.
FFP breaches do not instantly or automatically lead to disqualification from Uefa competition, but it would require the club to take “rehabilitative action” or else face consequences, including the ultimate Uefa sanction. Rehabilitative action means cutting costs, significantly so, in the case of Newco.
Current FFP rules allows for exemptions due to exceptional circumstances, which the current crisis certainly is. The process effectively adds-in revenue or subtracts costs you would otherwise see were it not for the exceptional circumstances, so in theory, Newco could claim allowance for a few lost revenue (although unlike Celtic, this will be very limited as they did not offer refunds).
We have to hope that no substantive changes are made to FFP rules.
Scottish football was a different place when we looked at Newco’s finances in February. Celtic’s interim accounts to 31 December showed £32m in the bank, we were on our way to nine-in-a-row and finances were very stable. 10 of the 12 others in the Premiership were living within their means and we had a new TV deal to look forward to. Since then, red ink has bled everywhere.
Our operating expenses for the first 6 months of the financial year were £7.6m per month. The manager, coaches and execs have taken pay cuts, while furloughed staff costs are met by the taxpayer, but I expect the deferrals players took will all have to be paid by the time this financial year closes on 30 June. Cash burn since 1 January will not be as high as £7.6m per month, but it will be close to this until lockdown started on 23 March and no lower than £4m per month since. There has been very little income since the new year (Copenhagen, some Scottish Cup and league receipts, retail), with money going out for refunds.
So what does this mean for our finances? The £32m balance at 1 Jan is likely to get us through to the financial year-end, plus or minus a couple of million either way. By 30 June, season ticket money will be in, but there is no way of knowing how well tickets will sell compared to previous seasons (we’ll not sell more, clearly).
Until lockdown is over, there will be close to nothing from stadium operations (£7.6m last season) and retail (£12.9m last season). The SPFL hopes to have fans attend games by October (the Championship business plan is counting on it), but we are looking at July, August and September with little income from many revenue streams. Next season’s finances are down to season ticket sales, Uefa qualification and a late bump from 10-in-a-row merchandise during what is likely to be a recession.
Champions League qualification brought media rights income to £33.9m in season 2017-18, the following season this dropped to (a still impressive) £15.7m for the Europa League campaign (other Euro revenues, like ticket sales, are not included in these figures).
If we qualify for the Champions League next season, I expect we will break-even. Progress through the Europa group stage and we will make a sizeable loss and a return to debt. Failure to reach the Europa League group stage would see us return a larger loss than at any time in our history by a huge margin.
Having spent this week looking at our finances and those of others in the Premiership, there are lots of unknowns ahead and just one certainty. Uefa are expected to confirm qualification competitions will be a single game each round, drawn randomly, home or away. Celtic should be seeds all the way through, but that advantage is lessened by an expectation of some away legs. Luck of the draw will never be more important.
We are going to win the league; I could not be more sure of this. I have not touched on Newco’s finances here but if you are interested, you can read back what we discussed in February. We might have problems to manage but they are a busted flush. It will all play out in the months ahead.
The season ahead could return the largest loss in the next 50 years of Celtic history. If so, we will need to work our way back, which will not be done overnight. Even the ‘sell to England’ strategy is not likely to be effective, as transfer fees are likely to suffer due to the crisis. Oh, and I think we need players for several positions, at least as cover.
When you look at Partick Thistle and others throughout the world, these are First World Problems. We have 10 to focus on, but just as winning nine-in-a-row did not happen as we wanted, the journey between here and next May is likely to be a rocky road.