Blackburn Rovers recorded their first win in three this past weekend, but for the Rovers faithful there was a more important issue that took precedence. The club reluctantly posted, the previous evening, a 36.5 million loss. A staggering figure that will strike fear into the future of the one-time Premier League champions.
Looking into the facts and figures of the accounts scratches a few heads but we’ll try and dissect it as simply as possible. Before player sales the club were down 24.3 million with an additional 11.7 down on player trades. The executive report states that the club is looking to be promoted back to Premier League but that they also aim to be within the Financial Fair Play (FFP) Regulations.
The first year back in the Championship might well be the worst in the clubs history with the amount of collateral that was put into the club with expensive signings, multiple managers etc. Despite a relatively successful summer of overhauling the squad, removing high earners (Morten Pedersen, Colin Kazim-Richards etc), the club is still in need of reducing the wage bill. Although this was down 14 million to 36 million from 50, the wage to turnover ratio actually rose from 92% to 136%. This can be explained mainly with lack of Premier League TV money that lost the club circa 23 million with an additional 4 million lost in ticket sales and commercial income.
The club is being financed through a bank overdraft from State Bank of India which is at 13.1 million for a year. This expired on September 30th. The accounts state that they believe this will be renewed. 36 million is also owed to the Venkys with no repayment date and is interest free.
Derek Shaw, the Managing Director, closes his comments maintaining that the club will always be looking for promotion but he again mentions the FFP, a new rule which could have damaging consequences for the club. However, from the accounts, it is understood owners Venky’s are willing to provide additional funds should the club’s overdraft with the State Bank of India not be renewed and also should the club fail to win promotion.
So now we have an understanding of the clubs finances, what does the FFP mean and what impact will it have? The aim of the new FFP regulations is to prevent clubs from over-spending on wages and transfer fees and accruing debts. By the 2015-16 season, losses at a Championship club can be no more than £5m, with a maximum of £3m funded by shareholders and clubs.
The FFP states that clubs can make a maximum loss of 8 million this current season, 2013-2014. Anything higher could result in a transfer embargo which would come into force January 2015. Should a club be promoted to the Premier League they wouldn’t escape punishment should they fail to comply, in this case they would pay a Fair Play Tax. For Rovers that would probably mean a 10 million fine.
It seems very unlikely the club will be able to meet the FFP for the season and they will indeed have to face a transfer embargo next year unless the club gets promoted. But it looks like it might be too far to reach this year despite Gary Bowyer’s excellent management of the team. The only consolation being, they won’t be the only club who face this embargo as the Football League and FFP begin their financial crackdown.