In this session Dr John Beech, one of the foremost experts on football club finances and what causes crises, walked us through the finances of a couple of well-known recent financial ‘basket cases', and shows you how to spot the signs in time to do something other than panic!

1. Supporters Direct 2010
How to spot the financial
crisis before it breaks
Dr John Beech
Head of Sport & Tourism
Applied Research Centre for Sustainable Regeneration
Coventry University

2. Some expectation
management!
Can we accurately predict a financial
crisis in a club?
Even auditors can’t
Liverpool
Hereford United
More about assessing exposure to risk
Medical analogy

3. A health check-up
With limited data
And usually an unco-operative
patient!
Using the data from accounts to
identify financial health (wealth) of
a club

4. Two kinds of problems
Long-term problems
Loans
Financial institutions / ‘benefactors’
Building a new stadium
Realism – what are the underlying
assumptions
Is the business plan to meet long-term
debts a viable one?

5. Short-term problems
Meeting the immediate bills
Players wages (generally >60% of the
total outgoings)
Tax
Other clubs
Suppliers

6. The financial analogy
Our long-term debts
A mortgage
A car loan
‘Ocean Finance’
Our short-term debts
Food
Electricity, water, gas
Council tax

7. Getting club accounts
Very few clubs publish them
Most publish ‘selected highlights’, in
other words the positives
Local press give selected highlights
(hopefully a more balanced
selection)
But no substitute for the real thing
But how?

8. Shareholders
Your Supporters Trust?
Companies house
FAME (but not exhaustive)
Universities (FE Colleges??)
Find a tame student (or lecturer!)
Enrol on an evening class

9. Beware
the multi-layered company structure
two layers – club and holding company
multi-layered – ultimately leading to an
offshore tax haven where disclosure is
highly restricted
Chelsea
Leeds
Portsmouth

10. Generally they begin with ‘headline’
data
Latest turnover (revenues; money IN)
Latest no. of employees
We are looking for trends too
Symptoms of ‘cold sores’
Symptoms of ‘long-
term, hidden, potentially fatal
illnesses’

11. Profile (ten years data)
Turnover
Are they earning money?
Profit (Loss) before Taxation
Are they earning more than they are spending?
Net Tangible Assets (Liabilities)
How much money would you raise in a ‘fire sale’?
Shareholders Funds
As shares, as opposed to loans
No. of employees
Not the squad size

12. Profit & Loss Account
Summarises a) the revenues
(INcome) and b) the costs and
expenses (OUTgoings) for a
specific period of time
Hence the profit (or loss) for that
period
Normally a financial year; in football
usually from May to May
Never quite up-to-date!

13. Balance Sheet
A snapshot in time
Overview of the cumulative situation
Less dramatic change year-on-year as it
reflects the longer-term
Assets – fixed and current
Liabilities – current and long-term
(includes loans)
Shareholders’ funds
Assets = Liabilities + Shareholders' funds

14. Cashflow Statement
In theory, shows where the money
is coming from and where it goes
In fact, contains no details of
sources or destinations
Shows how the money is
flowing, but not specifically where
to or from
Covers core operations, investing
and financing

15. Financial ratios; Profitability ratios
(Beyond an introductory session)
Difficult to benchmark for football clubs
Financial trends and changes;
Profitability trends and changes
Expect changes to be big in football
A lot of miscellaneous financial data
Watch for whether the audit was
‘qualified’

16. Some to look at!
Cardiff City
Portsmouth
Sheffield United
Southampton

17. The End
footballmanagement.wordpress.com
John@Beech.net