19Th Annual Financial Review of Scottish Football Season 2006/07 Pricewaterhousecoopers 19Th Annual Financial Review of Scottish Football 2 Contents
Total Page:16
File Type:pdf, Size:1020Kb
19th annual financial review of Scottish football Season 2006/07 PricewaterhouseCoopers 19th annual financial review of Scottish football 2 Contents Introduction 4 Profit and loss 6 Balance sheet 20 Cash flow 28 Club five year review 34 Post balance sheet events 48 Appendix one: The season that was 2006/07 52 Appendix two: What the chairmen thought 56 Appendix three: Significant transfer activity 58 Appendix four: The national team 60 PricewaterhouseCoopers 19th annual financial review of Scottish football 3 19th Football Review. An introduction by David Glen David Glen Welcome to the 19th annual financial review of the Scottish football premier league, covering the season 2006/07. Steady as she goes For the majority of the SPL clubs, financially season 2006/07 has been a stable one. For the first time in over 10 years the clubs have collectively generated a profit of £3m, a figure that was particularly assisted by some very successful trading in the transfer market with a record net gain of £19m being recorded. Celtic and Hibs led the way, recording gains of £9.4m and £6.4m respectively from the sales of the likes of Stilian Petrov, Shaun Maloney, Kevin Thomson and Scott Brown. The most profitable club was Celtic, who recorded a surplus of over £15m, boosted by the financial rewards of a very successful run to the last 16 in the Champions league. At the other end of the scale, Hearts posted the largest loss of just under £13m. A wage bill of almost £12.5m, with an income of only £10.3m is clearly not sustainable and will require some trimming going forward. Overall, 8 of the 12 clubs recorded a profit, which is a far cry from the depths of financial despair we were confronted with just 4 years ago. PricewaterhouseCoopers 19th annual financial review of Scottish football 4 The combined net debt has risen by £10m to £105m, with was cut‑off; there was no significant value in its stadium and both Rangers and Hearts posting increases of c£10m. In there was no significant fan base from which to generate Heart’s case this pushed their debt to over £37m which a significant income stream. Therefore the circumstances is now greater than Celtic (£9m) and Rangers (£16m) were fairly unique and I do not believe other clubs would be combined. Since these results were published steps have so readily faced with oblivion, but the situation nevertheless been taken by Hearts to reduce this debt by converting demonstrates the fragile nature of football finance. £12m into shares in the club. Will the credit crunch? In total seven of the clubs posted a decrease in their debt and of them, two (Falkirk and Inverness Caledonian At the time of writing, the other interesting aspect that Thistle) operate with no net debt. surrounds is the so‑called ‘credit crunch’ that is currently impacting the UK economy and the question is to what Other highlights include : extent might this impact the SPL clubs? • Combined turnover (gross income) increased from Certainly, having got themselves onto a sounder financial £170m to £175m. A modest 3%, representing no more footing with reduced debt and more affordable wage than an inflationary increase. Of this Celtic accounted structures, the majority of the clubs are perhaps better for a record £75m and Rangers £42m. equipped to deal with a down‑turn. It is too early to predict the extent to which the clubs might be affected as we do • The combined wage bill increased by 7% from £93m not yet know how deep this crunch might be, however, to £100m with the Old Firm again dominating (Celtic for the corporate and individual supporters of clubs, £36m and Rangers £24m) their expenditure on football can clearly be defined as discretionary. There are some early signs that cut backs Is there another Gretna out there? on such expenditure are being made, with household and commercial budgets having to be prioritised – how Gretna were promoted to the SPL in season 2007/08 extensive these cuts will be and how deeply they will affect and therefore do not feature in the analysis of this review. football, at this stage, we can only wait and see. However, such a significant event as the complete financial annihilation of a club cannot be ignored. Thanks On a number of occasions I have been asked if there is Thanks once again to my Sports Unit for helping me compile another Gretna waiting to happen? this report, in particular David Auld, Stuart MacDougall and Rory Forrest. Gretna were not the first, and will not be the last, club to be financially supported by a significant benefactor however, in comparison to most other clubs, Gretna had David Glen virtually nothing to fall back on when their financial lifeline August 2008 PricewaterhouseCoopers 19th annual financial review of Scottish football 5 Profit and loss. Overview The 2006–07 season was the 110th season of competitive football in Scotland and was financially one of the most successful seasons in over a decade with the SPL yielding a ‘real’ cumulative profit for the first time in 11 years of £2.8m. This was primarily a result of Celtic posting a profit after tax of £15m, while at the other end of the scale, Hearts produced the highest loss in the year of £12.9m. Overall, these results are a significant improvement from the prior year’s loss of £9.4m. 10,000 Historic Profit/(Loss) Analysis £000’s 0 (10,000) (20,000) (30,000) (40,000) (50,000) (60,000) (70,000) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Old Firm profits/(losses) Other profits/(losses) Total SPL profits/(losses) The financial results of the SPL clubs have been obtained from their Statutory Accounts for the year ended 2007. PricewaterhouseCoopers 19th annual financial review of Scottish football 6 The SPL Clubs’ Combined Profit and Loss Account ‘one of the most 2007 2006 Movement £’mill £’mill % successful seasons Turnover 175 170 3% in over a decade Wages (100) (93) 7% with the SPL yielding Other operating expenses (72) (76) ‑5% a ‘real’ cumulative Operating loss before player registrations 4 2 138% profit for the first Amortisation of player registrations (10) (8) 22% time in 11 years’ Impairment on player registrations (2) (0) 490% Net gain/(loss) on player registrations 19 4 395% Operating loss 10 (4) ‑343% Gain/(loss) on tangible fixed assets (0) (0) 89% Exceptional debt write‑offs 0 2 ‑79% Net interest cost (7) (7) ‑1% (Loss)/Profit before and after tax 3 (9) ‑131% Taxation 0 (0) ‑600% Loss after tax 3 (9) ‑131% Source: Statutory Accounts The key financial highlights of season 2006/07 are as follows: • Turnover increased by 3% to £175m (2006: £170m). The Old Firm had mixed results with Celtic’s turnover increasing by 31% to a record breaking £75m. Rangers on the other hand saw total revenue fall by 32%, although this is principally a result of this season being the first to incorporate their licensing deal with JJB. As part of this deal, the club no longer operates retail stores, hence losing a significant amount of merchandising revenue. In order to gauge a true comparative, like for like turnover only fell by £1.7m from £43.5m in the previous year. Further success was noted at Dunfermline and St Mirren with exceptional increases of 77% and 74% respectively, buoyed by a Scottish Cup Final appearance for the former and a return to top flight football for the latter club. • Total wages increased by 7% to £100m (2006: £93m). This figure is skewed by an exceptional increase in Dunfermline’s wage bill of 95%, as the club attempted to stave off the threat of relegation by bringing in a number of loan players. • Amortisation cost of player registrations increased by £2m to £10m, with £9.6m of this cost assigned to the Old Firm (2006: £6.9m). • Almost 50% of the gain on sale of player registrations related to the departure of Stilian Petrov, Shaun Maloney, Stephen Pearson, Stanislav Varga, and Ross Wallace from Celtic realising a total gain of £9.4m. In addition, Hibernian made an impressive gain of £6.4m due to the big money sales of Scott Brown to Celtic and Kevin Thomson to Rangers. • Total net interest costs remained stable at £7m (2006: £7m). PricewaterhouseCoopers 19th annual financial review of Scottish football 7 Profit and loss. Turnover The total turnover of the SPL increased by 3.1% to £175.4m in season 2006/07 (2006: £170.2m). Ten out of the twelve member clubs managed to increase their turnover as a result of improved European and domestic performances. Furthermore, an additional 28,000 spectators attended games throughout the course of the season, positively impacting upon turnover. Turnover By Club 2007 2006 2007 2006 £’000 £’000 Increase Increase Aberdeen 7,519 6,772 11% ‑6% Celtic 75,237 57,411 31% ‑8% Falkirk 3,997 3,303 21% 64% Dundee United 4,011 4,151 ‑3% ‑23% Dunfermline Athletic 5,149 2,905 77% ‑12% Heart of Midlothian 10,319 10,277 0% 22% Hibernian 9,847 8,706 13% 20% Inverness CT 2,877 2,742 5% 0% Kilmarnock 8,061 7,395 9% 20% St Mirren 2,956 1,702 74% ‑12% Motherwell 3,681 3,622 2% ‑10% Rangers 41,768 61,165 ‑32% 11% Total 175,422 170,151 3.1% 2.5% Average 14,618 14,179 17% 6% Average exl/Old Firm 5,842 5,158 18% 1% Source: Statutory Accounts PricewaterhouseCoopers 19th annual financial review of Scottish football 8 Aberdeen Falkirk An improved end league position, Falkirk consolidated their second ‘an additional 28,000 beating Rangers 2‑0 on the last day season in the SPL with a respectable of the season in front of a capacity 7th place finish (2006: 10th).