[Archived] Rovers Accounts Review

[philipl]

I'd argue that them being net sellers last season was a part of the business plan. Some seasons they will be net sellers, and when they find the players to make an investment in, they'll spend the money.

And according to Williams, we now are a sell to survive club.

"Provided we can finish around mid-table (season 09/10) I do not envisage any forced sales for the following year. In which case "trading" as opposed to "net selling" will be the order of the day."

Chairman's Statement in the Annual Report.

No I am very comfortable placing Whelan below the Walker Trust in the owners' league table.

[Majiball]

Agree on the scouting and academy, but wage spending has more of a relevance to league position than transfer spending. I'd only argue that a club our size has to look at the age of the players we're spending these wages on. Once a player hits 32 or so, we shouldn't have them on big wages.

I understand where your coming from and the correlation between wages and league position (I'd be very keen to see a new wages table and league table for last year if anyone has one?) but what difference would those two players make to our league standing? We'd still have 43M or so to spend on wages and if we do spend it wisely then with more support they could preform better.

Kish 0 app's

Reid 1 app then out for another 27 years

For a premiership team we have quite poor support for our players ( thats no slate on the team thats currently there ), no sports scientist, no nutritionist, no full time shrink and no attack focused coach. Sam's always going on about the extra 1%, well those guys could make more than a 1% difference to every player at our club from top to toe. Fitter, faster, stronger, prepared, focused and so on. Personally I think it could take our players up a level, all of them.

With the older players I have no issue with big wages but the lenght of their deals should be short. We've always been very generous with the lenght of our contracts and now we are stuck with a lot of old players past their prime making serious dollar. I'd take a similiar approach to Wenger after 32 1 year only, look at Salgado isn't he on a two year????

[RoversSG]

Is there really a correlation between wages and league position?

I actually did a study a while back and examined the wages and league position of EPL clubs in 07/08 and my conclusion was that for clubs outside the top 4, the relation between wages and league position is actually very weak.

For example, Newcastle and spurs spends more than most non-top 4 clubs in wages but they don't necessary finish ahead of us every season. What my study concluded was that there's no much difference if you increase or decrease our wage bill by 10 to 20% unless you want to break into the top 4 in which case, we probably need to triple our wage bill.

[American]

Is there really a correlation between wages and league position?

I actually did a study a while back and examined the wages and league position of EPL clubs in 07/08 and my conclusion was that for clubs outside the top 4, the relation between wages and league position is actually very weak.

For example, Newcastle and spurs spends more than most non-top 4 clubs in wages but they don't necessary finish ahead of us every season. What my study concluded was that there's no much difference if you increase or decrease our wage bill by 10 to 20% unless you want to break into the top 4 in which case, we probably need to triple our wage bill.

Was reading an article at the beginning of the season that cited a study saying that transfer budget has about a 20% correlation and wage budget has about a 70-80% correlation.

[philipl]

Was reading an article at the beginning of the season that cited a study saying that transfer budget has about a 20% correlation and wage budget has about a 70-80% correlation.

Sadly that is correct. Rovers used to be about the 75 percentile on wages and are now at the 40 percentile. The West Ham/Pompey splurge on wages sunk us two seasons ago.

Which is why I sincerely hope both those clubs go down as a salutary lesson to any club that suddenly goes bonkers on wages without an owner with seriously deep pockets to back it up.

City are paying bonkers numbers but it is small change for the boys from Abu Dhabi.

[only2garners]

"Provided we can finish around mid-table (season 09/10) I do not envisage any forced sales for the following year. In which case "trading" as opposed to "net selling" will be the order of the day."

Chairman's Statement in the Annual Report.

No I am very comfortable placing Whelan below the Walker Trust in the owners' league table.

To back that up, at the last Fans Forum meeting, John said that he expected our position to ease a little in the Summer when we get the increased TV monies and then gradually work back to where we are now as the commercial pressures drive things i.e. others spend more and we have to to compete. At the moment we are trading i.e. we have to sell before we can buy.

[Hughesy]

Philip - whens the account info due out?

[RevidgeBlue]

To back that up, at the last Fans Forum meeting, John said that he expected our position to ease a little in the Summer when we get the increased TV monies and then gradually work back to where we are now as the commercial pressures drive things i.e. others spend more and we have to to compete. At the moment we are trading i.e. we have to sell before we can buy.

That wasn't my understanding of what John said at all otg. My understanding was that he said we were currently operating a stategy of selling players to plug the hole in the operating budget caused by the wage bill being so high.

When the next round of improved TV money came in he hoped to be able to move back to not having to sell players and being a trading club as opposed to a selling club. After that as time went on he expected the constant upward presure on wages would probably eventually put us back to the position where we are now.

[Plastic Head]

I would like to know what recovery plans are in place should we be relegated.

I think one of the reasons teams struggle once they go down is that they don't have such a strategy in place.

I would like to think even allowing for several players having to be sold we should be one of the favourites to come back if we did get relegated.

The big problem would be retailing out Premier League postion once promoted again.

[den]

I would like to know what recovery plans are in place should we be relegated.

I think one of the reasons teams struggle once they go down is that they don't have such a strategy in place.

I would like to think even allowing for several players having to be sold we should be one of the favourites to come back if we did get relegated.

The big problem would be retailing out Premier League postion once promoted again.

Financialay knackered would be the phrase I would use.

The only real income would be the one year parachute payment. After that, gate reciepts would be virtually non-existent, TV appearance money absolutely minimal, any player with any value gone for knock down prices, sponsorship income wrecked. Apart from that, we should be fine.

[I_saw_Batty_score]

Keeping wages under control has to be the number one concern for a PL club. The Mirror today reporting that Utaka at Portsmouth is on 80 grand a week (presumably basic before any bonus and I'm guessing after tax as most football wages are quoted after tax). That's £16 million plus tax plus the £7 million transfer over a 4 year deal - incredulous.

Hopefully Rover's will remain to live within their means and not go down this route of stupid wages for mediocre talent.

[PAFELL]

No debate whatsoever to be had there. We need new ones. The Trustees would probably be the first to admit that.

I would prefer to try to encourage the current owners to keep hold of rovers and give the club the financial backing it needs. The Walkers Trustees have been good for Rovers and in the light of the owners other clubs have, I'd prefer to keep the ones we have.

It should be a lot easier for them to sell a successful club in the prem, than one that struggles with relegation year after year. Imo it would also benefit Blackburn as a town if Rovers were more successful than they are now.

[RevidgeBlue]

I would prefer to try to encourage the current owners to keep hold of rovers and give the club the financial backing it needs.

What if they won't?

They ceased putting any funding in some time ago and I suspect the chances of them putting any more in in future are non existent.

[PAFELL]

What if they won't? ALL THEY CAN DO IS DO WHAT THEY ARE DOING NOW - HOPE TO SELL.

They ceased putting any funding in some time ago and I suspect the chances of them putting any more in in future are non existent. THEY HAVE STOPPED FUNDING, BUT IF THAT CONTINUES THEY MAY FIND THAT THEY HAVE NOTHING LEFT TO SELL. OR THE CLUB WOULD BE SOLD FOR AN EXTREMELY UNDERVALUED PRICE. SO THEY MAY BE FORCED TO DO SO - BE INTERESTING TO KNOW IF THERE WAS ANYTHING IN JACKS WILL THAT PREVENTS THE TRUSTEES ALLOWING THE CLUB TO GO BANKRUPT AND OUT OF BUSINESS. BECAUSE THE ONLY WAY TO STOP ROVERS GOING OUT OF BUSINESS IS TO SELL THE CLUB OR INVEST IN THE BUSINESS - THE LATTER IS THE BEST ROUTE IMO.

[Plastic Head]

Financialay knackered would be the phrase I would use.

The only real income would be the one year parachute payment. After that, gate reciepts would be virtually non-existent, TV appearance money absolutely minimal, any player with any value gone for knock down prices, sponsorship income wrecked. Apart from that, we should be fine.

We'd be just like the other 23 then, only slightly better off than most.

[philipl]

This is the second part of the review. There will be a third where I will answer questions raised and go into more detail.

What I tried to point out in the first part is that the Walker Trust is still incredibly good value to the club even though there is no large amounts of new cash coming from them. Even saying no cash is a being too hard on them in my opinion; the costs of ownership to Rovers are nil- the WT takes nothing out of Rovers by way of salaries or management fees as the accounts show- and of the club's £16.9m net debt, £5m of that is financed by the Walker Trust at zero interest, £3m of which was injected last season and is repayable.

It is worth reiterating the point the Walker Trust made when stopping their annual subventions of £3m gifts and £3m loans. The numbers in the Premier League have grown so large that these amounts no longer make any material difference to the club's situation. I think that is worth bearing in mind in relation to the relegation question- in a lower division such amounts would make a material difference.

A personal comment and not one made by either the club or WT and so is this. If you consider where the Rovers' money goes, it goes into the pockets of multi-millionaire footballers- 90%+ of Rovers' turnover went in wages last season. If you compare this with the WT's community work in and around Blackburn it is hard to argue that paying an extra few millions in wages to players would benefit the town financially. We might be at the point where Rovers' players are wealthier individually than some of the more distant family beneficiaries of the WT whom the Trustees effectively would be denying to pay the players.

The Premier League has changed that much since 2000!

Now to the Annual Report and Accounts and I make a plea to the club to put the Chairman's and Managing Director's two reports on the club website- I didn't find them there when looking yesterday. These two reports are a model of clarity in communicating what the business of Blackburn Rovers is all about in just four pages.

Rovers supporters like anybody of limited funds in real life are experts at knowing what making do means and unlike supporters of richer clubs have a keener appreciation of the club's financial position. I don't know exactly where Rovers rank but at £50m turnover, I would be very surprised if Rovers do not rank in the top ten companies present in Blackburn. And certainly first by a mile in terms of profile.

Of that £50m, £6.7m came in matchday receipts- up 10% over the previous season despite the start of reduced pricing which is an encouraging sign. However, the disadvantage the club has is underlined by the fact that Arsenal rake in the same amount of matchday receipts from just two home games. It is not only the volume effect of having 60,000 average gates against 23,481 (down 2% last season) but the amount paid by the people going into the games that makes the huge difference.

I have previously posted that my stepson was the guest of a family with a box at Stamford Bridge. They pay £85k a year for that and £75k a year for their box at Covent Garden. The reality in London is that there are a thousands of people and businesses who have the wealth to make those sorts of payments yet it only takes 80 corporate boxes (accommodating 640 people) at Chelsea to yield the same annual matchday income as Rovers earn in a season. And there are a lot more than 80 corporate boxes at Stamford Bridge. How many corporate boxes for 8 would Rovers sell for £85k?

Yes the Champions League paying £59m to the winners and £35m to those reaching the knock out stages has twisted the competitiveness of the Premier League (putting it in context, the Champions League has paid roughly half the Glazer's interest costs since they arrived at the Mancs) but for Rovers, the huge difference is rich city v poor town in terms of competing at the level where we have grown accustomed to being. 'Twas ever thus.

So the crunch question is, where has the Rovers' money gone and in particular, where has the transfer income gone?

The first surprising answer is not to the bank. The club's bank debt remained constant at £14m and is expected to rise to £20m at the end of this season which would be an additional huge burden were we to go down.

However, there has been a dramatic reduction in net current liabilities- in other words how much Rovers are due to pay compared with the amount we are due to receive. I commented two years ago that the club had done amazing business in collecting cash from transfers out and spreading terms for payments for incoming transfers- that is evidently no longer possible.

Amounts payable for purchased players went up from £3.7m to £13.2m but amounts receivable from players sold went up from £2.6m to £17.4m. Netting that out, £5.3m of the difference between what we "received" in transfer fees and what we "paid" in transfer fees is not sitting in the Rovers' bank account but in IOUs.

Incidentally so much of global football worth is sitting in IOUs like this that it explains why UEFA and FIFA are so keen to sort out football club indebtedness. It is nothing short of a disgrace that England should be the home to the richest League in the world yet two clubs within that league- Man City and Pompey- that have badly defaulted on international IOUs on purchased players. City got out of jail when Abu Dhabi stepped in, Pompey are simply facing gaol from what I can see. I wouldn't like to be a non-UK club waiting for payment from West Ham either. Of course the PL is powerless to regulate debt because no rules can accommodate Man U and Liverpool and be credible at the same time.

Rovers with net worth actually increasing from £24m to £27.6m last year after reducing net current liabilities from £19.7m to £11.4m are a model of financial rectitude.

And before anyone leaps up and down and says "ah but the Trust are fattening the club for sale", please note 30 on Post Balance Sheet Events which reads- "Since the balance sheet date (30 June 2009), the club has entered into transfer agreements amounting to net transfer fees payable of £4.6m (2008 receivable- £7.3m)."

In other words the improvement in the club's underlying financial position was immediately expended on transfers in although I am left wondering just how expensive the transfer purchases were in reality or how cheaply Warnock was sold before contingencies.

Back to where the money has gone.

Interest payments at 3.25% over base to the bank collapsed from £1.6m to £800k so thanks to the financial crisis and good negotiating for that one.

There is an unexplained £1.2m reduction in social security and payroll taxes due which I suspect is a reflection of when these things fall due but owing less of that means Rovers paid it which in turn eats up cash.

Stocks leapt from £11k to £182k reflecting bringing the shop in-house and again ties up cash.

Prepayments jumped from £638k to £1.078m which is a belated answer to Hughesy's question of how season ticket sales are going- the answer of 30 June was very well indeed! That helped the cash situation obviously.

£689k was spent on new fixed assets during the year and a further capital commitment had been entered into for £495k by the year end. So Rovers are not stinting on re-equipping the club and they bought the land near Ewood where the school and church used to be.

But the really enormous numbers apart from the £5.3m tied up in net transfer IOUs were:

Wages up from £39.7m to £46.1m. Incidentally senior football players and management increased from 70 to 84 so Sam got some of his huge staff into Ewood, majiball.

And Media Revenue down from £41.2m to £35.4m. The cost of slipping down the league and only drawing 0-0 with the Baggies which turned out to be a harbinger for this season.

Add £5.3m in IOUs to £6.4m in wages to £5.8m reduction in media income and we get to £17.5m. And I would imagine the net gain on headline transfer fees betweem 1 July 2008 and 30 June 2009 won't be far away from that figure if anyone cares to work it out.

Two overall comments

- these are the accounts of a well-managed business within the exigencies of it being a football club

- what is striking is the club has spent serious money relative to the recent past on new players. The problem is that Sam and Ince have not bought as well as Sparky did. Irrespective of whether the market has changed relatively or the managers are worse, I think the league position and quality of entertainment are the judge of that.

[thenodrog]

What if they won't?

They ceased putting any funding in some time ago and I suspect the chances of them putting any more in in future are non existent.

Funding is a better word than investment when used in discussions on Prem football. But why on earth would anyone want to fund BRFC?

If you agree even loosely with Philips league table then you have to agree that the trust have done an absolutely brilliant job. Sure it hurts to see our best players leave every year but it'd hurt more if we were to go bust and disappear into the history books.

We'd be just like the other 23 then, only slightly better off than most.

Disagree. If we were to drop I think we'd do a Charlton / Soton / Norwich and drop again

[RevidgeBlue]

Thanks for the review philip, I'm not sure I agree with your gloss on it but it does explain where the money has disappeared to.

I would have the following comments.

Wages up by around 20% is an extortionate increase in one season - is there any indication of whether this was a one off increase caused by all the managerial upheavel or due to routine wage increases for the players?.

The large reduction in media income is probably primarily down to selling our better players, our profile worsening and our League position slipping so in that sense selling our better players is a self defeating exercise.

It's all very well saying that we are still awaiting a net 5. something million to come in for the relevant period in terms of our transfer activity but I'll wager Sam or any future manager never sees it for the purpose of improving the squad.

[AndyNeil]

if anybody wants a PDF of the 2009 Year End Accounts, e-mail me at: accountancy@fernhurstsolutions.co.uk

COYB

[philipl]

Chelsea re-enforce their position at number one in my list of owners

£340m of debt converted into equity.

And boy does that put the heat under the Americans at Man U and Liverpool if you read why they have done it!

[Hughesy]

Chelsea re-enforce their position at number one in my list of owners

£340m of debt converted into equity.

And boy does that put the heat under the Americans at Man U and Liverpool if you read why they have done it!

Yeah I just saw that too. Virtually debt free and expected to be running at a profit within 2 years.

UEFA expected to bring in new debt rules by 2012 to exclude teams from the Champs league Quality!

[Hughesy]

and of the club's £16.9m net debt, £5m of that is financed by the Walker Trust at zero interest, £3m of which was injected last season and is repayable.

£50m turnover, I would be very surprised if Rovers do not rank in the top ten companies present in Blackburn. And certainly first by a mile in terms of profile.

Of that £50m, £6.7m came in matchday receipts- up 10% over the previous season

Yes the Champions League paying £59m to the winners and £35m to those reaching the knock out stages

The club's bank debt remained constant at £14m and is expected to rise to £20m at the end of this season

Amounts payable for purchased players went up from £3.7m to £13.2m but amounts receivable from players sold went up from £2.6m to £17.4m. Netting that out, £5.3m of the difference between what we "received" in transfer fees and what we "paid" in transfer fees is not sitting in the Rovers' bank account but in IOUs.

Rovers with net worth actually increasing from £24m to £27.6m last year after reducing net current liabilities from £19.7m to £11.4m are a model of financial rectitude.

"Since the balance sheet date (30 June 2009), the club has entered into transfer agreements amounting to net transfer fees payable of £4.6m (2008 receivable- £7.3m)."

Interest payments at 3.25% over base to the bank collapsed from £1.6m to £800k so thanks to the financial crisis and good negotiating for that one.

There is an unexplained £1.2m reduction in social security and payroll taxes

Stocks leapt from £11k to £182k reflecting bringing the shop in-house and again ties up cash.

Prepayments (Season tickets) jumped from £638k to £1.078m

But the really enormous numbers apart from the £5.3m tied up in net transfer IOUs were:

Wages up from £39.7m to £46.1m.

And Media Revenue down from £41.2m to £35.4m.

Add £5.3m in IOUs to £6.4m in wages to £5.8m reduction in media income and we get to £17.5m. And I would imagine the net gain on headline transfer fees betweem 1 July 2008 and 30 June 2009 won't be far away from that figure if anyone cares to work it out.

Id already followed it in the summer - I had us at Sold - £28.9m - Bought £11.45m - Profit therefore £17.45m as more or less your figure above.

Just stripped out the main figures to make the key points clear.

One question Philip - after the balance sheet on 30th June 09 it says we have agreed £4.6m in fees to pay out - up to when & on who?? I though it was more than that....£6m Kalinic, £1.5m Chimbo, 400k NZonzi, £3.5m Givet

[philipl]

Id already followed it in the summer - I had us at Sold - £28.9m - Bought £11.45m - Profit therefore £17.45m as more or less your figure above.

Just stripped out the main figures to make the key points clear.

One question Philip - after the balance sheet on 30th June 09 it says we have agreed £4.6m in fees to pay out - up to when & on who?? I though it was more than that....£6m Kalinic, £1.5m Chimbo, 400k NZonzi, £3.5m Givet

If all those happened after 30 June, then we got £8.8m for Warnock but I think Givet pre-dated the year end in which case we got £5.3m for him. The £4.6m will be the net from ins and outs. I had Chimbonda at over £2m by the way so that would change the number again and didn't we spend a bit on signing some very young players as well?

The relevant period to match is 1 July 2008 to 30 June 2009, not this summer. I might have missed some but that means RSC, Brad and Bentley out; Robo, Grella, Diouf, Andrews and Givet in plus payments to Arsenal for Bentley and Ince et al for getting sacked (they get wrapped up in the trading account whereas Chelsea treat sacking payments as non-recurrent extraordinary items... every year!)

[Hughesy]

£52k on Nikopolpodus - The rest were freebies I think.

[Tyrone Shoelaces]

Many thanks for that Phillipl, even I can follow your comments. I don't know what to think really. We seem to be doing our best financially but it's an up hill struggle.