Profitability & UEFA

[White Noise]

http://www.bbc.co.uk/blogs/gordonfarquhar/2010/05/uefa_calls_clubs_to_account.html

Uefa calls clubs to account

Post categories: Football

Gordon Farquhar | 09:17 UK time, Thursday, 27 May 2010

"Uefa's executive board is expected to rubber stamp new club licensing and monitoring regulations later today."

It is the kind of news story that catapults most football fans into stifled yawn mode, if not complete catatonia, so I will do my best to explain why you should be aware and what it is going to mean for Premier League clubs from Chelsea to Blackpool, the Toffees to the Baggies and so on.

Uefa already runs a licensing scheme, based around certain financial criteria. Clubs that want to play in its competitions - Champions League, Europa League etc - have to comply with the terms of the license or they cannot take part.

Uefa has a clear view as to why it does this and what the intentions of the revised regulations are. They are to:

Introduce more discipline and rationality in club football finances;
Decrease pressure on players' salaries and transfer fees and limit inflationary effect;
Encourage clubs to compete with their revenues;
Encourage investment for the long-term benefit of clubs, such as investment in infrastructure
(sports facilities) and in youth;
Protect the long term viability and sustainability of European club football;
Ensure clubs settle their liabilities on a timely basis.
Frankly, it is hard to argue with any of that. So what is new? The 'break-even' clause, that's what - and it's a pretty significant development.


Uefa rulings will put the wallets of Liverpool's owners under further scrutiny

The devil is in the detail but, basically, it means clubs' financial returns will be monitored over a three-year period and they will be expected, on average, to spend no more than they earn, give or take a 5 million euros "immaterial losses" factor.

It is a simple principle but one that has taken a lot of quite clever Uefa men in navy blue suits a long time to frame in a practical and workable way.

Let us just start by saying this is not about existing debt, it is about what you earn and spend. It is also more about what you leave out of that calculation than what you put in.

Certain expenditure will be exempt. You can blow what you like on a new stadium or training ground, on your youth academy and your community activities. So can your wealthy benefactor. However, that wealthy benefactor can only subsidise other spending - transfers and salaries, for example - to a maximum of 45 million euros over three years, above and beyond the break-even level.

That is the bit the Premier League do not like. Let us take Fulham as the example. It would mean owner Mohamed Al-Fayed could not just plough any spare cash he had from the sale of Harrods into the club's transfer kitty with impunity.

This affects the smaller Premier League clubs most, as they generally have lower incomes. It tends to make it harder for a club like Fulham to break into the Champions League places by just bringing in lots of expensive talent, even if they can afford it. That, says the Premier League, is not a "good thing".

OK, so let us cut to the chase. How would your club stand at the moment?

Looking at the latest figures, Arsenal, Blackburn, Tottenham, Manchester United, Hull City and Stoke all tabled profits, so they are fine.

Fulham, Everton, Wigan and Wolves made losses of between £5m and £8m before factoring in academy, infrastructure and community spend, so that's OK, covered by the "immaterial losses" clause.

Bolton, West Ham and Birmingham made losses of between £13 and £20m, again before the permitted items. Considering the 'benefactor' clause allowing up to 15m Euros per season, they would be pretty much OK as well.

Aston Villa, Chelsea, Liverpool, and Manchester City would have some thinking to do as their losses are at a level that would trigger concern at Uefa.

It would not, however, suddenly mean they were not allowed to play Champions League or Europa League football at a stroke. The new measure is being added to the regulations as a "monitoring" item, which, if I've got this right, means they would be put under review and given warnings before being hit with the ultimate sanction.

Finally, none of this will cut in before the 2012/13 season, although the 2011/2012 financial returns will be the first benchmark for averaging out profit and loss over the next three years.

Never has your club needed a creative accountant more urgently - or a talented currency speculator given all this rationale has been worked out in euros.

And, as we know, the value of the pound in your pocket can go up as well as down!

[FC Silver Fox]

Good. That's all the large Italian clubs out. They haven't paid National insurance or social security on their players for the last 10 years. Every year, the parliament has to pass an amnesty law to cover it.

[finnster01]

Hull City turned a profit?

They are just about to go into administration.

Shite journo yet again. There are so many things wrong with this article I don't even know where to start so I won't even bother. All I can say as a businessman that runs my own business there are so many creative ways I can do my books (with full cooperation of my accountant and auditors) so I am sure MAF's boys are just laughing at this.

UEFA couldn't even win the Bosman case anyway. They are useless.

[WhiteJC]

http://www.bbc.co.uk/blogs/davidbond/2010/05/its_financial_fair_play_stupid.html
Football scrambles to tackle debt problem

Uefa president Michel Platini described it as the start of an important journey for European football that would eventually lead to a return of "economic common sense".

Thursday's approval of Uefa's new financial fair play rules means that, for the first time, clubs wishing to compete in the Champions League or Europa League must aim to break even each season.

In addition, club owners will be limited to investing just £38m in the three seasons after the regulations come in, starting in 2012/2013.

The aim is to create a more level playing field but the impact on England's biggest clubs could be very serious. The super rich owners of Chelsea and Manchester City, for example, will no longer be able to pour in hundreds of millions of pounds to write off losses and buy star players.

At the same time, the Premier League - which has been so resistant in the past to the slightest suggestion that its clubs should face a tougher system of regulation than that experienced by all other businesses - is introducing a raft of new financial rules.

The Premier League's annual general meeting next week is set to rubber-stamp a set of laws designed to prevent another Portsmouth-style collapse.

These include new measures which will allow the Premier League to intervene or withhold TV rights payments if it is unhappy with the financial direction the club is travelling in.

For the first time, it will have the power to:

*Assess clubs' financial sustainability through regular monitoring of accounts;

*Block a takeover if there were any doubts over funding;

*Demand full details of all loan agreements;

*Meet any potential new owner to assess their suitability.

But I have learned that next week's Premier League meeting will also include a discussion about introducing even tougher measures to deal with club debts.

With top-flight teams owing a combined £3bn, debt has become the dirtiest word in football, and smaller clubs - such as Wigan and Stoke - are asking whether the Premier League should be doing more to tackle the problem.

Some of the ideas due to be discussed include:

*A ban on all so-called leveraged buy-outs where the club is used as security to borrow the money needed to complete the takeover; (This would have prevented the Glazer acquisition of Manchester United or the sale of Liverpool to Tom Hicks and George Gillett.)

*Limiting the amount clubs can borrow to 25% of their income;

*Introducing a ban on borrowing from any institutions that are not approved by the Financial Services Authority;

*Restricting owner investment to equity and not loans (there is obviously some overlap here with Uefa's new rule);

*Breaking all player transfers down into two instalments - 50% up front with 50% left to pay.

These proposals go way beyond what Uefa passed on Thursday and what the Premier League itself will vote on next week.

Some of the bigger clubs are sure to resist any further measures that bound them in more red tape.

What all this reflects is a realisation, at last, that the vast sums of money being made in football are in danger of being thrown away by those clubs willing to gamble their long-term future on short-term success.

Football may take a while to arrive in Platini's land of common sense but it seems there is at least a will to try and get there.

[Kiwi Fulham Fan]

There definatly has to be some accountabilty in the long run, just cant keep on losing millions or is there a "safe limit loss"?

[finnster01]

" Limiting the amount clubs can borrow to 25% of their income;"
Can somebody please explain to me how this can possibly be legally enforced, and secondly how that is going to be monitored when you are dealing with holding companies owning holding companies owning clubs when those parent holding companies are all registered in the Caribbean and have no real legal governance and reporting issues?

This will never work.