Special Report: Football clubs face mounting financial challenges

THE administrations of Rangers and Portsmouth have highlighted the financial difficulties many football clubs are now faced with and while all West Midlands’ clubs still have their heads above water several are swimming against the tide.

The financial circumstances surrounding Birmingham City have been well documented all season following the arrest of owner Carson Yeung in Hong Kong last year on money laundering charges.

The club has battled on in the face of adversity and somewhat ironically has been excelling on the football field, where the team narrowly missed out on progressing to the knock-out stages of the Europa Cup and is well placed for a play-off place in the Championship.

However, the long season and the need to provide fresh legs for the final stages in race for promotion has now taken a dent after the club was placed under a transfer embargo for not filing its 2010-11 accounts in time.

In a statement, the club said: “Birmingham City can confirm it has been made subject to a transfer embargo by the Football League. This is due to not hitting a March 1, 2012 deadline for submission of the company’s June 2011 financial statements to the League.

“As has been widely reported, Birmingham International Holdings Ltd is expected to publish the financial statements by the end of April 2012.

“The delay in filing the financial statements is occasioned due to the delayed audit processes, with both the club and the group holding company having to handle a series of audit issues, together with the financial issues thrown at the club due to the arrest and freezing of the assets of the club’s main benefactor and changes to banking arrangements.”

The club said the embargo would not affect the day-to-day business of the football club and having signed three players on loan immediately before the embargo, it was now satisfied with the strength and size of its playing squad.

Blues’ Championship rival Coventry City has also had a transfer embargo slapped on it by the Football League for the same reason.

The club said it had failed to file its accounts in time because it was still negotiating funding arrangements with its owner, Sisu.

Club chief executive Tim Fisher said Sisu had funded the club for the past four years and was reviewing its budget for the coming year.

The club has insisted the situation is not serious and the arrangements are quite normal.

The club is currently involved in a relegation battle at the foot of the Championship and if relegated to League One its finances would likely be affected by the reduced income of the lower league sides.

However, Premier League status is no guarantee of success.

Aston Villa has reported record losses of £53.9m for the last financial year despite being bank-rolled by billionaire American owner Randy Lerner.

However, although the loss widened from £37.6m in 2009/10, revenue was up 1.3% to £92m.

The club said the results had been achieved “despite a backdrop of instability as the 2010-11 season constituted one of the most turbulent in the club’s recent history.”

The key drivers in the financial performance in 2010-11 were a continued growth of revenues and a 15.9% year on year increase in commercial income – match day income, however, fell year on year, given fewer games compared to the previous season’s strong domestic cup performance.

There was also an £8.3m reduction in bank borrowings, while an exceptional charges of £12m relating to “changes in football management personnel” is thought to relate to a compensation agreement to former manager Martin O’Neill.

Mr Lerner also pumped a further £25m of his money into the club.

Chief financial officer Robin Russell said: “Given the challenging economic environment that we have been experiencing in the West Midlands and indeed globally, we are pleased with the positive trends in our financial performance.

“The board of Aston Villa are confident that the actions taken since the end of the 2010-11 financial year have galvanised the long-term sustainability of the club and have also given us a better financial platform on which to build for future success.”

Considering their dire season on the pitch, the finances of Wolverhampton Wanderers look a little more solid.

The Molineux club’s year end results show a pre-tax profit of £2.2m once transfer dealings and net interest charges have been taken into account. This compares with a figure of £9m for the previous season.

However, the club said its operating costs had increased significantly due to the higher salaries it was paying its players. The wage bill rose from £29.8m to £37.9m, however, even this may not be enough to save the club from relegation.

The loss of Premier League will be a major blow financially to a club which has invested heavily in its off the field assets including a new stand at its Molineux ground and the redevelopment of its training facilities.

The harsh reality of life in the lower leagues has been highlighted by the situation facing League Two side Port Vale.

Stoke-on-Trent City Council has declared its intention to place the club into administration in an effort to save it from being liquidated.

The club, which also has a transfer embargo slapped on it, has been sent a winding-up petition by HM Revenue & Customs for unpaid tax.