THE company which owns Blackburn Rovers’ lost £36million last year making a New Year transfer embargo on the club likely.
Venky’s London Limited latest accounts posted a deficit £9m worse than 2012-2013.
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This means Rovers are likely to report another multi-million pound loss when their own financial statement is published later this year, which is likely to fall foul of Championship regulations on club debt.
The Financial Fair Play rules state Rovers can make a maximum loss of £8m for last season without facing a transfer embargo from New Year’s Day.
While details of how the first-ever such penalty will work are sketchy, it could make it difficult or impossible for Rovers to replace key players who leave Ewood Park.
The directors assert in the VLL accounts that the Rao family, and the ultimate parent company Venkateshwara Hatcheries Pvt. Ltd (Venky’s), has made clear it has the finances to fund Rovers for the foreseeable future.
They added that the focus of the group is to ‘obtain promotion back to the Premier League’.
Rovers Trust finance officer Dan Grabko said failure to achieve that aim by 2016, when multi-million parachute payments for relegation from soccer’s top flight run out, ‘could be catastrophic’.
Last summer VLL posted losses of £27 million for 2012/2013 followed by Rovers announcing a £36.5 million loss two months later along with a total debt of £54.5 million.
This week’s announcement of a £36million loss by VLL for 2013/2014 makes another massive loss in Rovers' accounts inevitable when they are published before the end of the year.
This is set to put them well above the fair play ceiling, fulfilling managing director Derek Shaw’s prophecy last year that a Championship transfer ban would hit Rovers if they failed to win promotion.
Blackburn MP and Ewood Park regular Jack Straw said: “The scale of these losses make another big loss for Rovers inevitable.
“That means a transfer ban is highly likely.
“This is very sad but the good news is that Venky’s have once again made clear their commitment to the club and determination to win promotion back to the Premiership.
“We’ve had a good start to the season now it’s time to keep our fingers crossed, hope and pray.”
Since relegation in 2012, Rovers' Premier League parachute payments have halved from £16m to £8m for this season and next, and will run out in summer 2016.
VLL directors, Anuradha Desai, Venkatesh Rao, Balaji Rao and Jitendra Desai, said they saw ‘real encouragement’ Rovers can return to the top flight.
In a joint statement they said: “The focus of the company has been for the football club to obtain promotion back to the Premier League, significant changes were made to the playing squad to reduce ongoing costs, whilst at the same time adding young talent, this enhanced the team’s performance resulting in an eighth place finish and narrowly missing out on a play-off position.
“The board believes the football club’s success during the 2013/14 playing season gives real encouragement that it has made a significant move forward in achieving its ultimate goal. This momentum will bring with it renewed supports from fans, which will in turn boost income streams and carry the club on to greater success.”
The just published VLL accounts, for the year ended March 31, 2014, show:
- An operating loss on day to day trading of £27m, down £100,000 on 2013, with the loss before tax rising to £36.1m after interest payments of £1m, a £4.7m loss on player trading, and a debt write off £3.4m; and
- A reduction in the wage bill from £39.6m to £34.6m, and a cut in other operating expenses from £23.2m to £21m.
Despite this the excess cost of wages over income rose from 111 per cent to 121 per cent after turnover dropped by £7.1m from £35.7m to £28.6m.
Matchday revenue fell from £6.9m to £4.3m, media revenue from £24.9m to £20.9m, and commercial revenue from £3.8m to £3.4m.
Net debt rose from £15m to £21.2m.
VLL bought a 99.9 per cent stake in Rovers in November 2010.
Venky’s put in £21.5m into VLL in the last year with no interest or intention for the funds to be repaid.
Mr Grabko said he was pleased Venky’s continue to support the club financially in its attempt to win promotion back to the Premier League.
He said:“The club is still solely reliant on their benevolence for existence.
“A football club of this stature is a massive barge and it can’t turn on a dime, so righting the ship was always going to take several seasons.
“The club is still, happily, operating on the assumption of promotion back to the Premier League, but the consequences of not achieving this in the next two seasons could be catastrophic.”
The latest Rovers club accounts, which will be released later this year, will cover the period up to June 30, 2014, and include the whole of last season.
The VLL accounts show that, since March 31, the club has received £1.6million in transfer fees but paid out £4.1 million to terminate former players and other employees’ contracts.
Rovers’ financial director Mike Cheston said: “We cannot comment as they are our holding company.
“We will comment on our own accounts when they are published in due course.”