Tuesday, 27 July 2010

Be sure to be prudent: FC Barcelona’s amazing disappearing profits

Different country? Same economy....


Having shocked the sporting world by failing to pay their players in June (and announcing they needed to take out a €150m bank credit facility), FC Barcelona went further today with the announcement of major adjustments to their previously published (although unaudited) results for the year to June 30th 2010.

The unaudited results had been published by the previous Treasurer, Xavier Sala i Martin on 30th June 2010 and showed EBITDA of €96m and net profit of €9m on turnover of €446m. The new President (Sandro Rosell) and his executive management have agreed substantial changes to the audited accounts with the club's auditors Deloittes. The changes generally relate to judgments about what revenue and costs to recognise, with the Rosell management and Deloittes taking a far more prudent approach than the previous board.

The accounting changes can be seen below:









The biggest adjustments come from two connected disputes over TV rights in Spain. FCB are now recognising a potential €37.8m liability to TV company Sogecable and are no longer recognising €18.5m owed by as yet unpaid by current rights holder Mediapro. Mediapro has sought court protection from its creditors due to a dispute with (small world) Sogecable. Although FCB have not yet published a cash flow statement, it seems likely that Mediapro's travails were the main cause of the June cash flow crisis.


Whilst the Mediapro/Sogecable adjustments are just tighter accounting practice, the need to make further adjustments relating to land sales and valuations and player sales (including that of Thierry Henry) hint at darker goings on to massage the shape of the balance sheet during the Laporta presidency.

The impact of the above changes can be seen below:





















The official FCB statement talks of a higher revised debt number of €442m (and €552m "gross debt"), compared to the originally published figure of €326m. From a normal IAS (or UK GAAP) accounting perspective, this is misleadingly high, as Rosell and his team like to include all sorts of short term liabilities in their numbers (such as prepayments). We will have to wait for the full accounts to see the true debt position.

With numbers so limited (and a considerable dose of Catalan politics to take into account), proper analysis of the situation is difficult at the moment. Having said this, FCB's financial difficulties should be a salutary reminder of not relying too much on an endless bonanza of TV money.....

LUHG

23 comments:

Tony Attwood said...

Thank you so much for this. On my bog (Untold Arsenal) we really pride ourselves on our ability to read financials, and we were suckered in by the earlier set of Barca figures, not realising that they were not the audited accounts.

Thanks for putting us right - I appreciate it.

Tony Attwood

Jack said...

I think the Ibra deal showed just how good Laporta is in managing finances

Patrick said...

Anders none of your posts since 29 june has had anything to do with our club the glazers or whatever.Perhaps you are hard at work digging deeper to try and establise the truth or maybe you are running out of ideas,I hope its the 1st part.Are Barca not supposed to be run by fans the same as must and Red knights proposed.Whats that of going from a net profit of 9 to a loss of over 30?And Club debts of over 500million,They are worse off than us

Steven said...

I wish United had Barca's level of debt.

UTID said...

@ Patrick
Last time I checked this was a blog about "trying to make sense of the Glazers, debt and football finance".

If you can't see how Barcelona and Liverpool fit into football finance then one has to wonder about your real motivations for posting here.

The only thing you've added since you started posting is a continual reference to a Forbes article about team values that has been in the public domain since April.

Patrick said...

Again today we have Our Chief Executive David Gill, has said that more transfer funds are available for a player of "very high quality"
http://www.guardian.co.uk/football/2010/jul/27/manchester-united-david-gill
So money is there to be spent but why waste on some 28 year old costing 30 million who has very few miles left on the cloak when we can go out and sign two quality young players namely Chris Smalling 20 and Javier Hernández 22

The Red Devil said...

@Patrick - The point of this article is to suggest that a lowering of TV revenues for United could be the straw that breaks the camel's back.

It's a salient point and all the more reason to try to increase those revenues which you have some semblance of control over, namely matchday and commercial.

Something the Glazers appear to be doing fairly well although, for some reason, an element of the fans don't regard this as good stewardship.

The Red Devil said...

As an aside to the above, well done on this article Anders. The finances of Real Madrid and Barcelona have been a mystery to me for years and anything that looks a little closer into them is very interesting.

Anonymous said...

@anders, are these numbers purely for the footballing side of Barcelona, or the whole club? If the latter, any idea how large their other sports are budget-wise?

Probably a drop in the bucket, but I'm curious nonetheless.

ja said...

I think it proves that football is not a typical business. And the old adage that to make a small fortune you have to start with a large fortune. The only way to make money as an owner is by selling at a capital gain. Cant understand why the Glazers claim the club is not for sale.

Bootsie said...

@TRD

"Something the Glazers appear to be doing fairly well although, for some reason, an element of the fans don't regard this as good stewardship."

Well they got us into the mess in the first place, heaping £700M debt onto the club, so why should we regard anything they do as good stewardship? If I threw a petrol bomb into your house then charged you for a bucket of water to put it out would you regard me as a good neighbour?

Steven said...

The Spanish government are looking into the TV rights situation vis-a-vis Real and Barca presumably with a view to more equitable distribution rights for all the La Liga clubs. Whether this will happen or not given the popularity of both teams remains to be seen.

Phil said...

The Red Devil: that doesn't really work. Between 07-08 and 08-09, TV revenue as a % of turnover grew, so the club is actually more dependent, not less.

And then you have to consider how have the Glazers pushed through these rises in turnover? Rises in ticket prices. Much of the increase in the wage bill, before you cite that, can be accounted for by the growth in TV deals since 05, a trend which is seen at many other clubs.

Not convinced.

Great article Andersred.

Anonymous said...

As David Gill has pointed out again and again the club is not 700million in debt and to claim it is is serving your own agenda

andersred said...

The point of this article is not really "to suggest that a lowering of TV revenues for United could be the straw that breaks the camel's back". It's really just an article about sloppy accounting at FC Barcelona!

The point about TV money is just my own conclusion from this sorry mess that it should be a salutary lesson to football clubs anywhere - as indeed should the ITV Digital and Argentinean domestic rights debacles.

Hubris is dangerous in any industry and football is often guilty of believing it's own hype. Clubs are clearly not immune from the economic pressures in the countries in which they are based and would do well to remember that!

I hope FCB sort this out as I (like many) have a soft spot for them.

Patrick, it's football finance blog - not just a United blog.

anders

Anonymous said...

@ Anonymous 11:06
The PIK debt is held by Red Football Joint Venture.
Get their latest accounts and read P1 where its principal activity is the operation of a football club.
Then check for how many times the words "Manchester United" are used.
Then check P29 where it outlines the 716m borrowings.

Matt said...

@RD
>> Something the Glazers appear to be doing fairly well although, for some reason, an element of the fans don't regard this as good stewardship.


Not really.
If you were to set my house on fire, and then call the fire brigade - I wouldn't have a go at you for calling the fire brigade. I still wouldn't be happy with you.

Patrick said...

Sir Alex has been quoted today in various news outlets defending again the ownership of OUR club by the Glazer Family
“When Manchester United Football Club went plc without doubt it was always going to be bought. Somebody was going to buy it. It was inevitable. It's unfair that because a particular family like the Glazers have bought it, they should come under criticism when anybody could have bought it.”
"I have to say they've done their job well. They support myself, the manager, they've supported the players. I've never been refused when I've asked for money for a player, so what can I do other than carry on the way we're doing it, and the way I'm allowed to carry on? I've no complaints”
“The debt has come through by the club being bought out by an owner. You know full well that when a business is bought it's usually bought with debt," he added.
"Because it's a football club it seems to attract more negative reporting from the media and from the fan but Manchester United Football Club, when it went plc, it was always going to be bought. It was inevitable.”

What do people make of Sir Alexs Statement today.In Fergie We trust

Si, East Manchester said...

Patrick why are you quoting from a Ferguson interview that's been widely published in the media on an Anders blog article relating to football finance at Barcelona?

Si, East Manchester said...

On the subject of Barcelona, it's simply a tale of money being spent which they do not have. The fan owned issue has nothing to do with it.

Glazers out said...

Totally disgusted after reading fergie's comments re the glazers, felt sick if I am honest.

LUHG

Loyal to the red said...

Mr Keith Harris is now the front man for a Mystery takeover bid for liverpool fc.Does this show that he has lost interest in buyin us.

Anonymous said...

Just Silence.Is everybody on Holidays or what?????????