Friday, June 5, 2015

News: Millers' man talks football finance


Rotherham United are on a firm financial footing but many clubs around them are getting themselves into debt, striving for the growing financial prize of playing in the Premier League.

Professional services firm, Deloitte, has recently published its 24th Annual Review of Football Finance which looks at clubs' business and commercial performance, providing a comprehensive picture of English professional football's finances, set within the context of the regulatory environment and the wider European game.

It looks at the 2013/14 season when Rotherham United successfully gained promotion to the Championship. Almost half the clubs in the Championship that year had wage costs greater than revenue and only three clubs had a ratio below 70%. Championship clubs' aggregate net debt increased by 12% to £1.1 billion at summer 2014. This is equivalent to more than twice the aggregate revenue of the clubs for 2013/14.

Speaking to the club's own Millers Player, Paul Douglas, chief operating officer at Rotherham United (pictured below, right with manager Steve Evans), said: "I'm interested in the whole issue around spending and insolvency. As a club we try to do things in a sensible way. We try to be sustainable and the current mood for us is worrying with a move to more expenditure and more risks for clubs.

"We would like to see a system where spending controls are tighter, although we may have lost that battle, and certainly where the monitoring of those controls is tight, so that clubs can't get into trouble in the first place. And if they do get into trouble, then the people that get the clubs into difficulty are the ones who should be paying the price."

In its financial results for the year ended December 2014, gaining promotion to the second tier of English football helped to increase turnover at Rotherham United to £11m, up from £7.1m in the previous year. It posted a profit before tax of £167,000 compared to a loss before tax of £477,000 for the previous year. Wages and salaries came in at around £4.8m and total staff costs at £5.4m.
Douglas added: "The knee-jerk reaction is to hammer clubs that fall foul of it but what we say is that we accept the fact that you've relaxed the financial controls, let's make sure that we monitor those finances properly, let's employ enough people at the Football League to ensure that club's can't overspend but if they do for whatever reason, it's the people who spend who should be getting punished, not increasing the penalty on the clubs and the communities around them.

"You need a deterrent, and we think a ten point deduction is more than enough. Any more than that and you're going to deter future people coming in to take clubs over, and you're punishing the communities around the clubs rather than the people that got the club in trouble."

Douglas speaks from experience having been part of the Millers setup since April 2006. The borough's football league club fell into administration for the second time in 2008 and was saved from liquidation by local businessman, Tony Stewart, who brought them out of administration via a Creditors Voluntary Agreement. The club was docked a total of 37 points by the Football League in little over two years.

Adam Bull, senior consultant in the Sports Business Group at Deloitte, said: "Championship clubs continue to deliver some alarming financial results. Whilst the desire of individual clubs to reach the promised land of the Premier League is understandable, and heightened given the value of the new broadcast deals, The Football League is right to try and ensure this is not at the expense of the long-term sustainability of any club."

With the new financial fair play rules introduced in the Football League, which limits spending on total player wages to a proportion of each club's turnover, clubs in the Championship agreed to introduce a breakeven approach that requires clubs to stay within pre-defined limits on losses and shareholder equity investment that will reduce significantly over the next few seasons.

From the beginning of the 2016/17 season, Championship clubs will have their financial performance continuously monitored over a three season timeframe rather than over the course of one season as they are now. They will be permitted to lose more than £15m, but not more than an aggregate of £39m over three years.

Douglas added: "We've just relaxed the financial controls and as a result of that people will now be nervous about what that's going to mean - will clubs get themselves into bigger difficulty? Sadly, and statistically and historically, there's no evidence at all that clubs can be trusted to run their own finances without taking a gamble. The times when we've seen fewer clubs getting into difficulty is when we've seen strict and well monitored financial controls imposed upon them."

The Millers, who staved off relegation from the Championship in the 2014/15 season, reported that all revenue streams saw impressive growth during the year ended December 2014, including higher average match attendance, a greater number of season tickets sold, increased media receipts following televised playoff games, and increased advertising and sponsorship income.

The club said that its financial performance for the year was an "impressive result in light of current economic conditions and in comparison to other clubs in the same league."

Rotherham United website

Images: RUFC


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