Tuesday 27 December 2011

Stacking goalkeeper, A phenomenon of Italian economic crisis?

First of all, did you know these name:
 Paolo Tornaghi: Internazionale player
Matteo Trini: Juventus player
Niccolò Manfredini: Fiorentina player
Edoardo Pazzagli: Fiorentina player
Nicola Ravaglia: Cesena player
Ugo Gabrieli: Lecce player
Davide Petrachi: Lecce player
Gianluca Curci: Roma player
Diego Manzoni: Parma player

Serie A clubs stacking goalkeeper, a level that never saw in the past.

It had many reason that players failing to loan out. For example, they were ghost player in order to create fictional profit in player-swap. But most of the name were good player in "Lega Pro", just like Ravaglia, Manfredini and Trini. Did the club wished to stay as a extra cover as fourth keeper, the club wished to stack them in order to listen offer from Serie B? Not every youth product create profit. Inter produced Tornaghi, Bindi, Cordaz and Moreau but none of them create a real profit. (not paper profit from paper swap). Juventus only profited Mirante for 3 million EURO in recent years. However at least someone willing to borrow them, when they had money to pay wage.

In the past Serie A clubs had to pay a portion of TV revenue to Serie B, just like Premier League. However since the set up of Lega Serie A and collective TV bargaining, the obligation to pay Serie B from A also expired. The source of income of Serie B clubs were came from selling youth product to Serie A and a little TV income. The source of income of Serie A club? Serie A were heavily rely on recapitalization or the shareholder loan to survive. However the introduction of UEFA Financial Fair Play in 2010, or even before that, Inter, Milan and Roma started a balanced budget or even a surplus budget in transfer market. In Lega Pro Second Division, the league was shirked from 3 groups to 2 groups. That means about 10 professional team withdrew. For the survived team, they also cut their budget on player wage. Player turned 20 were considered young-professional but player under that age could consider as trainee. Clubs could offered them "young-professional: contract but it was more economical to borrow them from youth team. A professional with trainee wage and experience, is that really a professional? Looking at Melfi squad (http://www.webcitation.org/63wF88qLB) The inexperience squad was an example that how the club survived. Old experienced but slow player no longer existed in the squad. In exchange they were replaced with even more low wage young (born 1989 to 1993!) player.

In the past we saw clubs using player exchange to create profit. Mechanism was sold a youth player (which in accounting it had no value, as value was based on hiring cost) with a certain price (say a few million) to B. But at the same time, B sold another youth player back to A with the same price. If the price was right, there is nothing wrong. Clubs were free to swap their surplus defender with midfielder they need. However most of the deal in turn were flops. Did you remember Alberto Maria Fontana, Marco Varaldi and Martino Olivetti? Profit was created because the selling profit of a player was registered in the accounts instantly, but the acquiring cost was amortize proportionally to player contract. Say, selling a player for 10million and buy another player for 10 million in 5-year contact, would create a net effect of 8million in the first season and 2 million cost in each year in next 4 seasons. Adding the effect of VAT the deal only create cost over time but it do borrow the future revenue to that window. Looking at the recent transfer window. Boateng only signed by Genoa for about 6 million but half of the contract sold to Milan for 6 million but paid via a young striker who tagged for 4 million. In turn Boateng proved his price tag (over 10 million) but Giacomo Beretta? That even worst in Bologna "bilancio" (Italian words for report and accounts) Pisanu-Valiani both tagged for 2.5 million EURO for 50% rights? Pasi-Elia 1 million? Few days before the closure of 2010-11 financial year, Caidi-Luppi for 0.75 million? G.Bassoli-Gregorio for 1million?! Rickler-A.Bassoli for 1.5 million!! It is not illegal to make the deals (or very difficult to prove it was flopped and only for false accounting) but for years it was considered immoral in Italian media. The come back of these deal, was to avoid the negative equity appeared. Braca should used these method as Messi and Xavi were very under rated in accounting. However these players were recently graduated from youth team or struggle to find a place in Serie A. The true market price of Serie B player were below 1million. Most of these players were likely a toxic asset of the club, made the club already faced a negative equity but did not appeared on paper. In 2011 window, Parma also swapped Luigi Palumbo with Thomas Fabbri; while Vicenza was swapped Edoardo Bonicelli with Simone Tonelli. I did not had their accounts and reports yet. It was normal transaction if they had a low price tag, but if the tag was high, everyone know what the purpose was. The deals either delayed the bankruptcy or the club faced its turning point and started to make profit again.

Lets wait and see the fate of Italian football.

Saturday 23 April 2011

Sampdoria budget

Sampdoria had announced its 2010 annual result. It was a net loss of €12,109,456 (revised from €11.5M.) Compared with 2009, was a net loss of €16,389,970

Wednesday 23 March 2011

fate of Manchester United? (updated 29/3)

Red Football JV Limited had a loss of 105million pound in 2009-10 seaseon.

Despite Manchester United is one of the wealthiest club in the world, however the parent company of the club, Red Football JV Limited, was heavily affected by the debt. Thanks Glazer.

The structure of the club ownership is as follow:

Glazer family > Red Football JV > Red Football Limited > Manchester United Limited > subsidiaries (including the team itself, MUTV, etc.)

(intermediate holding company ignored , source)

Manchester United Limited was healthy. Red Football Limited had a EBIT of £27.3 million, but the total recognized losses of the financial year was £84.3 million due to the interest expenditure, which it had a net debt of £357.8M.

That's not the full story, Red Football JV Limited 2009-10 result, which could be obtained in the "Companies House", shown the group had a pre-tax loss of £109M, which isn't a good sign. In 2008-09 season the pre-tax profit of RFJV was £21.6M, which mainly due to the sale of Ronaldo (profit of selling players in 2008-09 season was £80.7M) The net debt was £566M in 2008-09 season.

Glazer is clever. He borrowed money to buy a hen which can lay golden egg. And bankrupt of the parent company did not affect the team itself. When the parent company was liquidated, the banker still able to sell the subsidiary without affecting the business. The net asset of RFJV was stood at £37.M in 2008-09 season. Sound inexpensive? But Glazer rejected an offer of £1.6 billion from Qatar ruling family. That's is, if Qatari only buy the the team itself and Glazer needed to clear the debt by its means, he still received net cash of about £1 billion, and if the Qatari bore the debt, that's mean it would cost more than £2billion. Glazer borrowed money to buy Manchester United, it is a good profit as he did not take his own money to buy it, but now he is the owner, and he knew there are potential  buyers, and the family can borrow easy money from the group, just let see Glazer when he sold it for a new world record.

Wednesday 2 March 2011

Post-Tsunami of economy? Half-yearly result of Football industry (2010-11)

Team

Net income (loss)

Arsenal Holdings plc

-£2.52M

Red Football Ltd.

-£6.27M

Tottenham Hotspur plc

£4.24M

Birmingham International Holdings Ltd

-HK$65.47M

Rangers FC plc

£9.02M

Celtic plc

£7.06M

Juventus FC Spa

-€39.50M

AS Roma Spa

-€14.93M

SS Lazio

€7.36M

SL Benfica - Futebol, SAD

€0.53M

Sporting Clube de Portugal - Futebol, SAD

€2.46M

FC Porto - Futebol, SAD

€6.32M

Tuesday 1 February 2011

Financial fair play

If everyone are criminals, then crime did not existed.

Here is the rule and how the European giants smack UEFA.

In the one hand Chelsea announced its operating loss of 2009/10 season was £68.6M, its broken the British domestic transfer record of £50M on the same day. Just like hiking, when you think you reached the peak, a long road is waiting for you to finish.

The rule will started from 2011/12 and the check will on 2013 for reviewing the aggregate result of 2 previous season. However, seems not everyone listen and started their reform.

And it is easy to cheat. Juventus once sponsored by FIAT, its sister company. For Manchester City, the UAE tycoon is one of the sons of UAE president and Emir (king) of Adu Dhabi, it is much easy to find a shirt sponsor. Who knows the economic effect is positive or not in the Airlines account? They just want to say i am rich. Italian once used a method of cross-trading to false accounting. A rubbish player tagged for a few billion, both club exchanged it, made it asset became larger. Clubs may now use a method of trading footballers and non-football asset. A tiny land worth 1000 billion and exchanged with a player worth 1000 billion, generate 1000million football related revenue and non-football related investment. However this method only benefited one club. If the figure became smaller, such as 1 to 2 million euro, it should help to narrow the gap without finding irregularity.

If there is a law but no one comply and no one get caught, the law does not existed. If everyone is a robber, they it is fool not to robbery.

In the other hand, did every European giant spent wiser? Real Madrid only signed the Togolese troublemaker, but he is famous for his greed. Wages also counted in the fair play and will he stay? Bayern Munich had a big pocket for future signing, but the long term break-even differ from short-term fluctuation. Manchester United operating profit (EBITDA) was positive in 2008/09 season Arsenal wage cost was increased in 2009/10 season but its football related profit (EBIT) was £44.8M For Liverpool, the Uruguayan and the Toon soldier were actually paid by Chelsea, by acquiring the Spaniard. So the net investment is small. For the Cinderella, Džeko is expensive and the club wage cost exceeded its income. But the club could use a tricky way to balance the book. It hired many good players and selling them counted as football-related income. If they successfully loaned out, it cost zero to the club but before that their value should be write down to zero, i.e. no amortization cost required. So a record breaking loss in 2010-11 season may created a false break even in the following 2 seasons. However it cannot last long.

Go to Italy. Inter was quiet in the summer but became the big spender in the winter. To lead the race under financial fair play, building a team before the transfer fess are counted. The amortization is high in the first year, but by extending and extending the contract, the amortization cost could be lower until a sudden increase of writedown by the retirement or selling. The rule blocked any team to spend too much in one season (as it would increased the amortization suddenly), but a team could spent a lot in one season and then keep not spending in the following season, if it is good enough. (i.e. the amortization raise in the first year and then decrease/constant as old player life span rate is difference) Despite under the rule, they only required a aggregate breakeven of a certain period, it is still risky to spend too much in one window. (note that income did not reflect immediately after player investment as sponsorship and TV revenue were pre-agreed, and not all the team winning the champions league and/or local title and got the prize money, dividends of TV watcher increase depends on contract and the only effect is on the season ticket and shirt sale) Juventus re-build its squad in 2007 and 2008 , but in exchange they were flops. Remember Tiago and Amauri? The clubs just can't predict they can closed their pocket. So in January 2011 became the last spending chance. Gamble the last chance the amortization was not counted. In the other hand. The old age of Milan cannot prevent the big spending in the following year, or you think Milan still has a world-class young defensive line? Only Thiago Silva counts. The good news is UEFA has a provisional measures: the loss could be covered by the decrease of shareholder equity (and such likes) of a certain degree. But saving this season profit as reserve for future season , could not prevent the future decrease of shareholder equity (and such likes). Fine tune a team is safer than big spending. Lastly, Juventus net loss of 2009-10 season was 10 million euro and they had a net investment of 24million in the summer "calcio mercato" and could raise to 66.6million if all the buy option excised. While Roma was 22 million net loss .

UEFA did not allowed clubs to cover the loss by the blank check of banker, and selling land and hotel. Portuguese seems deal with the rule with issue new share (but claiming the shareholder equity clause again and again?) and issue bonds. Porto is good at buy-low sell-high and they may survived.

Would all the clubs failed the break-even condition and no big clubs in UEFA Champions League? Would there be a new G-14 league? Lets see.