I work hard on this site, as I am sure most people would agree. But that doesn’t mean that I am not occasionally lazy. I read the Sevco accounts in detail the day after they came out, and I set aside some facts which I wanted to highlight, but I gave myself a break from doing it right away.
I wasn’t the least bit concerned that some hack would beat me to this; although it’s all in the public domain they are the really lazy sods.
I thought the piece might keep until the new manager was appointed, all the better to highlight the conditions he’d have to work under, but I underestimated the ability of those running that club to screw up even the most basic thing.
As that “global search” is taking longer to complete than a George R.R. Martin novel, I thought I better get on with it.
There is something in those accounts which hasn’t been highlighted anywhere, to the best of my knowledge, and yet it’s the most important thing in them. It concerns the club’s short-to-medium term projections. They are equal parts fantasy and delusion, but they are the devastating conditions the next manager will have to live with.
They do not portend war-chests, let’s put it that way.
Every business which produces accounts has to satisfy its auditors by offering an overview of where they see the business going over the next two to three years; when your accounts already come with a “going concern” qualifier they are especially important.
They break down how a business is going to grow, and in the case of a loss making one how it intends to break even.
And Sevco’s projections are barmy.
Their break-even plan is predicated on stuff so improbable that a meteor striking the earth is more likely to end our quest for ten in a row.
Really, it has to be read to be believed and I did read it and I still don’t believe it.
For openers, their business model relies on 2% growth across the club, per annum, during the five-year period until 2022.
This is not an insane figure; for Celtic it would be a huge disappointment only to hit 2%.
But, as I said the other day, if Sevco goes into a tailspin where fans stop attending games as regularly as they do, they can forget any kind of growth. Instead they’ll see a contraction in the business that, in itself, would tip the club into the abyss.
A drop in growth from 2% to 1.3% is regarded as a critical issue, which could seriously impact the financial projections and the future of the club.
Growth depends on football results, but here football results are even more important. Although they impact on growth figures, they also impact on other projections. Even if they manage their 2% growth target, success in terms of breaking even still depends on the football results getting them across the line.
Here’s what it says about “short term” goals in that regard; this means this season.
“Finish in top-3 of SPFL Premeriership, qualify for Europa League participitation.”
I left that exactly as it reads; Premiership is spelled wrong and so is participation.
In a club’s annual accounts.
And that was only in the single paragraph I cut and pasted; I have no idea how many are in the actual thing itself.
But that could not be less important; what is important is that they are already failing on that crucial measure.
They are currently fourth … and if you wondered why the club is encased in such panic right now then maybe that’s a clue. To fail to meet such a clear-cut objective would be ruinous and it would probably, in and of itself, devastate the balance sheet.
And it dovetails neatly into the next problem; their projections, over the five year period, are awfully heavily predicated on European football. Specifically, on the club reaching the Europa League Group Stages twice in that time frame.
Think about how unlikely that is.
Think about how difficult it will be for them to do that even once, with no seeding, and a co-efficient in the toilet because of last season’s defeat to a team from Luxembourg – that result will haunt them for years.
Their five year projection is ludicrous.
Even without a season ticket drop-off, and that is a certainty, that is sheer fantasy land nonsense.
Yet the accounts do not hide how crucial that assumption is to their future performance; it is listed as Critical, as something which would have potentially serious consequences for the viability of the club.
But it gets worse, because there are other critical thresholds listed in the accounts, and these are the ones that make European group stage football little more than a pipedream. For a start, there’s salary costs; the 2% growth figure allows for them to pay their players slightly more. But go above that, and not by much – by 3.25% over the five years in fact – and that, too, constitutes a major, and serious, problem which throws their cash-flow projections into the bin.
Let’s give them the benefit of the doubt, let’s say they can increase salaries by 5%, which is unsupportable under this “business plan.”
Now add on the 3.25% overage and round it up to be generous.
Say they can increase their wage costs over the 5 year period by 9%.
Well 9% gets them nowhere near where they need to be in terms of parity with Celtic.
Our wage costs are around double theirs at the moment, if you believe what was printed in the papers the other day. Telling a Sevco boss who’s coming in that he has to keep cost increases to under 9% is not going to infuse anyone with any sort of belief that they can do this job.
In fact, a 9% rise is, itself, sheer fantasy; all the indications are that the next manager will have to make drastic cuts before he can spend a penny. But the 3.25% increase above and beyond what their growth targets set out is down there in black and white, a clear-cut part of the business plan.
The next manager will have to keep wages under tight control, and there’s really no way around it.
It’s one of the first things UEFA will insist on seeing evidence of should the club have to answer for failure to meet Financial Fair Play.
Transfer spending is another area where the squeeze is going to be especially tight; another critical target depends on them keeping any increase in transfer spending above and beyond the growth rate to 22.6% over the five year period.
And that, my friends, is no joke at all.
Crucially, we don’t even know what that means; the club freely admits that it spent over the odds in the last window.
If we give them the benefit of the doubt and assume a 50% overspend – it is likely to have been much higher – that gives their next boss £4 million to spend in a good season. Over a five-year period, that’s £20 million. Allow for a 22% overage, and you’re talking about a kitty of around £25 million.
Would spending that even in one season help them catch us, far less over five?
How does spending that affect the wage ratio, and keep them under that 3.25% increase?
Answer; it doesn’t.
Spend £25 million, even over 5 years, and you blow that number to Hell.
Anything above and beyond that, and their financial projections collapse.
Their next manager isn’t getting a pot of gold; he’ll be lucky to get a pot to piss in.
You want to know why he’s not already in place? If they have to pay someone compensation, they are done. If the guy wants to bring his own backroom team they are done. If he wants a reasonable budget above and beyond the current level, they are done.
If someone is willing to work there, knowing all that, these numbers lock him tight into financial targets which are probably unrealisable anyway and the squeeze will begin soon enough. Fail to qualify for Europe and it’s over. Fail to reach the Europa League groups and it’s over. Those overages, such as they, the little wiggle room they have, will disappear as growth plummets. Fail to hit that 2% growth target and it’s over.
At that point the wage costs and transfer costs the club already has will be far too high to be sustainable.
That all these projections depend on one another makes the whole thing a house of cards just one sneeze away from complete collapse. Fail on even one of them and the rest of them don’t matter at all, because the “business plan” is already in the grubber.
There’s no realism to this.
It is funny money.
It is delusional.
The people who wrote this must have left their disbelief at the door when they read those targets.
From a standing start, a club that’s almost operating at maximum has to grow by 2% every year, has to meet domestic league targets, qualify for the Europa League groups a minimum of twice in five years after this year’s team didn’t get through the first qualifier, and they have to do all this on a transfer budget increase of 22.6% over five years whilst they keep any wage increases under 4%. Hey, if it was that easy every club would be doing it.
Their next boss is a dead man walking before he even starts.
Their fans will not tolerate second place for five more years.
This business plan is constructed to ensure that they will achieve exactly that, if they are lucky.