Monday, 18 October 2010

Why Barcelona are entering a period of “austerity” and probably can’t afford Rooney....



The shadow of UEFA's Financial Fair Play Regulations ("FFPR") continues to fall over European football. Whilst most commentators see the FFPR as being designed primarily to clip the wings of the sugar daddy financed Manchester City or Chelsea, the last few days has seen their practical impact on a club that should require no external financing; FC Barcelona.
On Saturday, new President Sandro Rosell and CEO Rossich Anthony not only persuaded Barca members to vote for court action against former President Joan Laporta but presented a budget for the current 2010/11 financial year which imposes breathtaking cuts on the formerly spendthrift club.

The Rosell revolution
In some ways, the plans for 2010/11 contain the usual Barca swagger. Matchday and media income is projected to increase slightly implying progression to semi-finals of the Champions League for what be the fourth year in a row. What has gone however is the enormous spending of the Laporta era. Sporting salaries (84% of which relate to football according to the most recent accounts) are projected to fall 6.2% having risen 17% last season. Player amortisation (the cost of transfer spending recognised over the contract life of acquire players) is projected to fall 17% and other costs are supposed to fall a George Osborne like 24%!

Bringing costs back in line with income is of course just good practice, and Barca's need for an emergency credit line in the summer told us all we need to know about how overstretched the club had become. After all, Laporta's regime oversaw the ludicrous saga of Zlatan Ibrahimovic's transfers which the club claim cost €33.4m including no less than €8m to his agent, the lucky Mino Raiola.


What has not been mentioned in all the gnashing of teeth in Catalonia is the threat to Barcelona from UEFA FFPR. Without the full 2009/10 accounts (which are yet to be posted on the club's website) we cannot fill in all the details, but the table below shows my estimate of how Barca would have done on the regulations' "break-even" test last season, as well as how the 2010/11 budget stacks up (footnotes at end of post):



On my calculations, FC Barcelona would have missed UEFA's "break-even" target by a staggering €48.5m if the rules had been in place last season. The "Acceptable Deviation" UEFA say they will permit each year is only €5m and of course Barcelona do not have a Sheikh Mansour to fill some of the gap.

The Rosell plan, shows the club squeaking in this year with a c. €10m surplus putting the club on a firmer footing for the first "monitoring period" for the new regulations, the 2011/12 season. Plans are of course plans and football is inherently unpredictable. Rosell and his board know all this of course which is why I think we can probably rule out the Catalans in any future bidding war for W Rooney esq.


Footnotes to FFPR table
* Only net finance costs provided by the club
** Non-football sporting revenue/costs assumed to be permitted for inclusion under Annex X B(1)(k) and C(1)(k)
*** 2008/09 youth teams costs assumed constant in 2009/10 and 2010/11

**** Estimated


The new UEFA regulations can be downloaded here.


LUHG

13 comments:

Anonymous said...

Hi Anders
it would be interesting to see a workup for United over the same period. I am not quite sure how much of our 'exceptional' net interest payable of c.65m would feature under 'Finance costs'.
I suppose a determination of break-even based on 2010 results might be skewed by some of the one-off expenses surrounding the recent refinancing.
I hadn't realised that youth expenditure was so high at Barcelona. Assuming we can produce expense carveouts for youth\community development, what sort of figures might we be looking at?
A 2010\2011 working would almost certainly include the carveouts as a relevant expense seeing as the monitoring period begins from 2011/2012 inclusive. Carveouts taken after YE 2011 would produce a massive deficit that wouldn't be righted in the yext year of the 2year monitoring period.
Going forward, annual dividend entitlements will come in to play.

I know that the break even calculation is more P&L than cashflow but wouldn't the following give a rough guide to our break even position:
EBITDA-Player Amort+ Profit on disposal of players-bond interest-dividend + expense carveouts?

Darren said...

Excellent blog again Andy.

Talking of Rooney and where he could end up....All the speculation seems to be that he might head to City. But surely City are going to fail the FFP rules, so would Rooney really go to a club that can't offer him European football? I'm not convinced. What's your opinion on City and the FFP rules?

Ian S said...

Well, the heat is on.

Rooney wants out because of the situation you have so superbly described. The Glazers are stopping United from competing for the top players.

Will it sink in?

Is it an extremely cleaver ploy to force the Glazers hand. Ferguson is not cited by Rooney as the one unable to give the appropriate assurances. David Gill looks like he is finally going to pay the ultimate price along with the Glazers. If sey now sell United, Ferguson and Rooney can both claim victory and continue.

I don't think Ferguson could come out and effectively declare no faith in the the owners without causing 10x the problems that Rooney will.

Is this the beginning of the end for the Glazers and presumably it will devalue United. Although I guess nowhere near as much as if Ferguson effectively said I quit because of the owners.

Anonymous said...

Ian S, you sound like a right tard now? Ohh well, carry on the stupidity that all the anti-glazers are showing.

Si, East Manchester said...

Anonymous @ 21:18

You don't see the bigger picture do you? Utd's best player has just held the club to ransom. Rooney has simply put a further burden on the club coffers by calling their bluff and it can be explained simply as the following: Club offer Rooney a new contract worth less than he thinks he's worth...Rooney asks for more. Club says no. Rooney says you don't match my ambition i'm leaving. Club says oh. Cue frantic negotiations behind closed doors. Club offer more money 'cos there's possibly a humiliating exit on the cards of their best player and biggest marketing chip. Even worse, he could go to our nearest rivals who can offer him anything he wants. Club and player (with agent laughing his head off) emerge from frantic meeting after 24 hours...Rooney has signed a new contract. The End.

The Glazer situation hasn't changed. Do you think they are suddenly going to buy about 5 players in January 'cos they promised "our Roo"? Rooney has just got himself £230k per week by making everyone associated with Utd look total cocks and you are the sort of numbskull turd who laps this up as some kind of defeat for people who dislike the owners. To go back to my bigger picture point, the bigger picture is that no one has won here and it shows just how bonkers the top flight has become...the only thing it might mean is if Rooney is sold some time later then "Uncle Malc" can now make a few quid. I don't suppose it crossed your mind that he could have more or less walked for free next summer if he wasn't given what he wanted? He and Stretford have held all the cards and made the club and Fergie look desperate. It's sad.

Anonymous said...

Si, separate your emotions from logic. I never said any of what you are making me out to have said. All I said was most of the anti-glazers are just showing a crapload of stupidity. I am not pro-glazer mind you, but what I do know is I have my own thought process capacity, and I choose to exercise it independently of the sheep.

Si, East Manchester said...

Anonymous (another one) @ 20:28

Care to elaborate on what crap all the anti-Glazers are saying? Is that all as in every single anti-Glazer then? Who are the "sheep" you speak of?

The way i see it is that both anti-Glazer fans, pro-Glazer fans and the ambivalent fans have said things about the Rooney situation to make them look like cocks this week. Why are you trying to suggest it's just anti-Glazer fans showing stupidity? (Credit where it's due though, i notice your first post suggested "all" but you managed to tone it down for your second one to "most").

Finally, as for seperating emotion from logic, in what way have you done that yourself by generalising like you have done in your first post?

Anonymous said...

Anywhere You can get a Link to the
Royal Bank of Scotland vs Tom Hicks Court Case?

andersred said...

Re: LFC case,

High court judgement available here:

http://bit.ly/d2OJsL

and Texas TRO here:

http://bit.ly/cCNS8B

anders

Steve said...

Interesting as always, but will UEFA really devalue its premier tournament by booting out previous holders like Barca and Man Utd. And Inter. And Real. I'm not holding my breath.
And as for City and Chelsea, if either should win the title, then the CL would look pretty laughable without them involved.
Looks like an all North London final in 2011 then- maybe they could play it in September...

Anonymous said...

Regarding the Rooney saga, I'd believed that the Glazers blinked during the contract stare-down stage with Wayne Rooney. Why? Because they cannot afford for the team to fail on the pitch and thus causing a run on the value of MUFC. Also, Rooney is their most valuable asset after they sold Ronaldo. They're simply too financially perched on the edge and after seeing Hicks & Gillett got body slammed by the banks and having LFC wrenched from them & sold for a song to NESV - They've got to be paranoic about the situation. If Rooney walks, MUFC's value declines & if their on-field performance suffers, then they will be looking at a meltdown a-la-LFC with Hicks-Gillett on board!
Look for significant trimming of the squad (mainly the sick-notes and 30+ squad players) to accommodate Rooney's new wages - Gary Neville, the 2 sick-note Owens (Michael Owen & Owen Hargreaves), Park Ji-Sung, Michael Carrick, Wes Brown & John O'Shea.
Oldies like Edwin VDS, Rio, Giggsy, Scholes are still crucial to the team but they would be quickly phased out if money is made available to SAF as part of the promise to Rooney's contract signing. Berbatov, Vidic and Evra remained 1st team stalwarts but would be next batch to phase out!

johndouglas said...

I appreciate the concern which is been rose.This is a wonderful opinion. The things mentioned are unanimous and needs to be appreciated by everyone.

Well, it’s amazing. The miracle has been done. Hat’s off. Well done, as we know that “hard work always pays off”, after a long struggle with sincere effort it’s done.
--------
johndouglas

Ramsdens Gold For Cash

Anonymous said...

Whats with the silence Andy?Expecting a major story soon.