Wednesday, January 5, 2011

Grounds For Concern At Schalke?


Despite winning their last three matches before Germany’s winter break, including a notable success against reigning champions Bayern Munich, this season has been a mixed bag for Schalke 04. They have struggled in the Bundesliga, making a desperately poor start when they lost their first four games, including a crushing home defeat in the derby against bitter rivals Borussia Dortmund, but have cruised through their Champions League group, finishing ahead of Lyon and Benfica to secure a very winnable last 16 tie against an inconsistent Valencia.

Their indifferent form in the domestic league has been made worse by the dazzling displays of Dortmund, who sit triumphantly at the top of the table and appear to be unstoppable in their pursuit of the title. In a way, this season has been the polar opposite of last year, when the newly arrived coach Felix Magath led a fairly ordinary Schalke side to a surprising runners-up position. Thus, expectations were fairly high this season for a team that was expensively reinforced over the summer with the addition of an exciting new strike force made up of veteran Spanish forward Raul from Real Madrid and the prolific Dutch goal scorer Klaas-Jan Huntelaar from Milan, backed up by the creativity of the promising midfielder Jose Manuel Jurado from Atletico Madrid.

Given Schalke’s angst-ridden history, their fans are probably not overly surprised with the unpredictable nature of their exhibitions this season, as they have long since become accustomed to expecting the unexpected of the Royal Blues. In fact, this is a team of many contradictions. By anyone’s standards, Schalke 04 is a huge club, one of the most popular in Germany with over 84,000 members, that has won the championship an impressive seven times. However, all of their titles were secured long ago between 1934 and 1958, the last victory coming five years before the formation of the Bundesliga in 1963.

"Raul in an unfamiliar blue shirt"

Since those heady days, they have come to be regarded as notorious under-achievers, who are liable to press the self-destruct button once they are in sight of an elusive Bundesliga title. No matter how big a points lead Schalke build up during the course of a season, something always seems to prevent them from being ahead when they reach the finishing line, so in the last decade they have finished second on no less than four occasions.

While last season’s disappointment was compensated by the knowledge that Magath’s unheralded team had performed a minor miracle in coming so close, previous failures had been heartbreaking for Schalke’s patient fans. Their team had been seven points clear in 2007 before throwing the title away with three consecutive defeats, but the most agonising moment occurred in 2001 when Schalke were denied by a Bayern Munich equaliser against Hamburg that arrived in the fourth minute of injury time with the very last kick of the final game – from a hotly disputed indirect free-kick.

Throughout this barren period, the Schalke supporters have been nothing short of sensational. Even when it became clear during last season’s home defeat to Werder Bremen that die Knappen would once again end up as Bundesliga bridesmaids, the fans continued to serenade the players and coach, forcing them out for an emotional lap of honour. As WAZ wrote, “No champion can celebrate so beautifully.”

In a bid to reach the next level and avoid similar disappointment, Schalke have splashed the cash this summer. In fact, they have spent more than any other club in the Bundesliga with only Wolfsburg, backed by the mighty Volkswagen, coming anywhere close to their net spend of €19 million, which comprised €36 million of purchases (mainly Huntelaar €14 million and Jurado €13 million), partly mitigated by €17 million of sales (Rafinha to Genoa for €9 million and Heiko Westermann to Hamburg for €7.5 million). Those figures do not include Raul, who arrived on a free transfer, but whose two-year contract will still cost Schalke at least €8 million, based on his reported salary of €4 million a year.

This expensive investment in the squad was justified by Schalke’s automatic qualification for the group stages of the Champions League, which will bring in at least €20 million additional revenue, but the largesse was still somewhat surprising, given Magath’s comments last season, “No matter how well we are doing, we have to keep an eye on our finances. As far as transfers are concerned, we have to retain a sense of proportion. Everyone knows we don’t have much money, which is why we have to be careful when making investments.”

Indeed, when the club’s board announced that Magath had been given a €30 million transfer budget, many fans did not react with the customary delight, but were instead worried that the club was going to over-extend itself financially, which would once again raise the spectre of bankruptcy that had been narrowly avoided in the past via urgent cash injections from a plethora of varied sources. This has left supporters rather nervous and uncertain over the club’s financial situation, hence the investment in new players was seen as a cause for concern as much as celebration.

"The Night of the Hunter"

The supporters’ caution is understandable, as Schalke have been beset with financial problems over the past few years. They really thought they had it made when they arranged an €85 million bond in 2002 with the investment bank Schechter & Co, the largest club bond in Europe until then. At that time, this was regarded as an exciting financial instrument with analysts pointing to similar offerings at the likes of Leeds United, Newcastle United, Southampton and Leicester City as evidence of its viability. In hindsight, we know that in reality this was no more than a gigantic loan, securitized on future gate receipts – a poisoned chalice that has not worked out well at any of those clubs.

In Schalke’s case, the money was used to fund an extravagant spending spree with two main areas of investment: a palatial new stadium and a team fit to grace that modern arena. Such high expenditure is nothing new for Schalke. Indeed, in 2007 the club boasted that it had invested well over €400 million in the Veltins Arena, infrastructure (offices and training complex) and players since 1994.

In the following year they admitted that making these investments simultaneously “obviously took a tremendous effort”, but they still allowed themselves a touch of hubris by adding, “it is paying off more and more.” This was a reference to Schalke’s achievement in the 2007/08 Champions League, when they got past the group stage for the first time in the club’s history, only being narrowly defeated by Barcelona in the quarter-finals.

"Jurado keeps his eye on the ball"

Of course, this is the dilemma facing all football clubs. While they might be tempted to try to buy success, they need “to strike a balance between financial consolidation and continued progress on the field of play”, as stated on Schalke’s own website. However, it is obvious that winning performances on the pitch can drive revenue growth or, as former Schalke CFO Josef Schnusenberg explained, “It was clear to us that the kind of success we had last year would help us to reduce our liabilities much faster.”

The club’s former general manager, Andreas Müller, explained that the business plan depended on Schalke achieving at least third place in the Bundesliga every season, thus sharing in the riches of the Champions League. This is why they have put so much money into the squad, especially during the tenure of the previous general manager, Rudi Assauer, wonderfully nicknamed “Cheroot Rudi” after his cigar smoking habit. Such a growth strategy can make sense, but it comes at a price, not just in terms of transfer fees, but also a high wage bill. It is also a major gamble, as no club is guaranteed to qualify for the Champions League, especially in the topsy-turvy Bundesliga.

Nevertheless, Schalke have not hesitated to spend money in the past few years. Since the turn of the millennium, there have been only two years where they were not net buyers. In that period, they had a net spend of nearly €100 million (purchases of €161 million less sales of €62 million), a huge amount for a Bundesliga club and only exceeded by Bayern Munich and Wolfsburg. As the chairman recently explained, “Schalke 04 will not become a saving club. The pitch remains the foundation of our activity.”

In fairness, the transfer expenditure is higher in years when the finances have received a boost, like 2002/03 after the bond was issued and 2010/11 after they qualified for the Champions League, but their record in the market has been patchy to say the least with a limited return on the investment in players like Jefferson Farfan (€10 million), Christian Poulsen (€8 million), Orlando Engelaar (€6 million), Rafinha (€5 million) and Ze Roberto (€3 million). They also let Mesut Ozil go to Werder Bremen after a falling-out with management for the paltry fee of €4 million, only to see him shine at the 2010 World Cup, resulting in a €15 million sale to Real Madrid just two years later.

When you see the impact that Champions League revenue has on Schalke’s revenue, their strategy becomes a little more understandable. This was most evident in 2008, when the club reported record revenues, very largely thanks to €27 million from UEFA due to their Champions League run, which did not include €3 million additional gate receipts. On the other hand, Peter Peters, the board member with responsibility for finance and administration, ascribed the significant €23 million reduction in 2009 revenue to “failing to qualify for a European competition.”

The former CFO Schnusenberg actually said that future revenue growth could only be generated by European competition, as the potential for increases in advertising and ticketing had been virtually exhausted. That might have been slightly exaggerated, but the three German clubs in last year’s Champions League certainly did coin it: Bayern Munich earned €45 million, Wolfsburg €26 million and Stuttgart €23 million. In Schalke’s case, it might be too simplistic to say that the club makes a profit when it qualifies for the Champions League, breaks even if it plays in the Europa League and makes a loss with no European competition, but it’s not too far from the truth.

The other main reason why Schalke are struggling financially is the cost of constructing their sparkling new stadium, which opened in 2001. Holding 61,500 spectators, the Veltins Arena is one of the most modern stadiums in Europe, boasting a pitch that can slide outside the stadium, a retractable roof and a giant hanging scoreboard, but it cost a staggering €191 million with finance being raised entirely from the private sector. This meant that Schalke had to pay over €20 million every year in interest charges and repayments, which is a huge sum for a club whose annual turnover averaged around €125 million in the last six years.

"No stadium blues"

Although the new stadium has increased revenue, there is limited scope to raise ticket prices, due to the staunch resistance of German fans to paying too much to watch football. Similarly, the anticipated boom in hosting non-sporting events has not really happened, as there is so much competition from other locations. It very much looks like the club would have been better off going for a cheaper alternative, as they appear to have badly miscalculated the stadium’s revenue potential. This drain on resources was exacerbated by investment in other infrastructure, such as training facilities, medical centre, new offices, club shop, etc. Moving to a new stadium can be financially beneficial, e.g. Arsenal’s switch to the Emirates, but it should not be considered a panacea, capable of curing all financial ills.

The policy of investing in the squad, while at the same time significantly upgrading the club’s facilities, has resulted in uncomfortably high debt levels, the eight highest among football clubs worldwide according to Forbes (though I would question their numbers). For some strange reason, the club seemed almost proud of this approach with Schnusenberg proclaiming a couple of years ago, “We have used debt financing to take Schalke 04 to the position it is in now.” To be fair to him, at that stage the club had been reducing its liabilities (from €130 million in 2006 to €106 million in 2007), but these have been on a rising trend ever since then.

We have to be quite careful here when discussing Schalke’s debt, as there are two factors that complicate matters. First, most commentators refer to Schalke’s total liabilities, which includes debt plus other payables such as money owing on transfers and trade creditors. Second, the figures quoted sometimes refer only to the football club, but on other occasions are those from the Schalke Group.

Let’s try to make it easy by looking at the last published accounts (as at December 2009), when the football club’s liabilities stood at €135 million, including €88 million of debt, made up of €67 million outstanding on the bond and €21 million bank loans. That essentially covers the cost of the football business, such as buying and paying players, plus facilities. To that sum, we need to add another €114 million, primarily money owed for the stadium, which gives total group liabilities of €249 million.

Whatever the exact figures, there are a couple of important points that can be made without fear of contradiction, namely that the debt is far too big for a club of Schalke’s size and that it is still increasing. The key question, as Schnusenberg himself said so presciently a few years ago, is “whether the club is in a position to service this debt.” He went on to caution, “To achieve that, it is necessary to increase revenue. If that does not work, then we have a problem.” Well, yes, can’t really argue with that.

Actually, although the debt has obviously become a massive issue, it is not really the club’s biggest problem, which is liquidity, namely the ability to cover the running costs, such as paying the players, suppliers and the taxman. Germany’s leading business daily, Handelsblatt, reported that many invoices were allegedly paid late, using information from credit agency, Dun & Bradstreet.

"Farfan for the common man"

This is where the numbers reported in the profit and loss account can be very misleading. Although the revenue streams look good on paper, much of the cash from those income streams has already been utilised or pledged to others, including future gate receipts, sponsorship income and stadium naming rights. As an example, the club signed a significant shirt sponsorship deal with Russian gas producer Gazprom worth up to €125 million over the life of that contract, but most of this money (the fixed element) was received upfront, so hardly any cash will be received in future years, even though the annual income will be reported in the profit and loss account. A similar deal was done with kit supplier Adidas.

A shell company was formed to handle the latter transaction, called FC Schalke 04-Service GmbH, which is just one of the countless subsidiaries that make up the Schalke Group. Unlike, say, Borussia Dortmund, the club is not listed on the stock exchange, so does not have to publish consolidated accounts for the whole network of companies. This lack of transparency is a significant problem confronting analysts who want to review Schalke’s financial position, as they can never be quite sure that they are seeing the whole picture. The holding company owns companies covering the stadium, catering, ticketing, museum, licensing rights and the old ground, but that’s merely the tip of the iceberg.

"Rakitic: it's a celebration"

This intricate inter-company structure allows Schalke to seemingly create income in the football club out of thin air, though all they are doing is passing money from one group company to another. Nothing illegal there, of course, but it could certainly be described as creative accounting. There are numerous examples. In 2003, the old Park stadium was bought for a nominal sum, then revalued to €16 million, which was booked as “exceptional income.” Similar revaluation of companies formed to handle rights marketing and catering produced another “exceptional income” of €66 million in 2004, which miraculously turned a €23 million loss into a €43 million profit.

No wonder Schnusenberg said, “We live from hand to mouth.” It’s all done with smoke and mirrors, which does not exactly inspire confidence in the financials, especially as the club has already been investigated for accounting fraud (resulting in a small fine). It’s like a grand game of pass the parcel, but in this case nobody knows exactly what will happen when the music stops. It may be a little unfair, but when striving to review these accounts, I can’t help but think of Sir Walter Scott’s famous quote, “Oh, what a tangled web we weave, when first we practice to deceive.”

With those health warnings in mind, it is difficult to be confident about the strength of the balance sheet, even though this looks fine for the football club, as assets exceed liabilities by around €30 million in 2009. However, we know that does not represent the whole story by any means and the last available balance sheet for the Schalke Group showed negative equity of €56 million, which means that the group is technically insolvent.

"Metzelder seems a little unsure of his position"

In fairness, there are some legitimate “hidden” reserves, as the real market value of the players (€141 million according to Transfermarkt) is significantly higher than that reported in the balance sheet (€31 million as at December 2009). Although we are not comparing apples with apples here, because of the timing difference, there is clearly considerable value here – but only if players are sold (which is not always a good idea).

To be fair, Schalke have taken some action to reduce their debts. In October 2009, the club agreed to sell Gesellschaft für Energie und Wirtschaft (GEW) a 50% stake in the stadium for €25.5 million (with the possibility of buying these shares back in the next ten years), but even this deal was not without controversy. First, GEW is a wholly owned subsidiary of the city of Gelsenkirchen, so this looks very much like a bailout funded by the taxpayer. Second, as this sale leaves Schalke with only 40.7% of the stadium, the Arena company will no longer appear in the consolidated balance sheet, thus further reducing visibility of the club’s financial position.

On the plus side, Peters stated that the contract meant “that funding is in place for the whole of the 2009/10 season. A further sale of rights, shares or players will not be necessary.” What did his predecessor say about hand to mouth arrangements? Meet the new boss – same as the old boss.

"Neuer - the only way is up"

Another element in the debt restructuring is the raising of €10 million of capital via a supporters’ bond, paying 5.5% interest and redeemable in six years’ time in 2016. Other German clubs have already issued similar bonds, including Cologne, Arminia Bielefeld and Alemannia Aachen, but this is hardly a badge of honour.

Most importantly, in the first half of 2010 the club managed to redeem the remaining €65 million from the 2002 bond that “had been limiting us in our actions” and to re-finance the debt with a ”major international bank” at lower interest rates, saving around €2 million a year. Peters gave this the full monty, proclaiming that “the shackles that have restricted us are history”. More worryingly for Schalke supporters, he claimed that this deal was done “in order to preserve the club’s independence.”

Schalke’s financial woes do make you wonder just how effective in practice are the licensing rules of the German Football League (DFL) that are supposed to regulate the finances of football clubs. After all, when Schalke were granted an unconditional license, Peters argued, “The outcome of the appraisal procedure is further evidence that we are on the right track financially.” While it is true that controls are tighter in Germany than other countries, the controls are clearly not flawless. The reality is that the licensing is primarily focused on a club’s ability to finance the next 12 months, as confirmed by Christian Seifert, the Bundesliga chief executive, “The key issue is to see if a club has the liquidity to allow it to play the upcoming season.”

"Magath - his way or the highway"

This means that the amount of debt is not necessarily an issue for the licensing. That said, Seifert announced before this season that there would be a stronger emphasis on debt in the future, “Until now we had the rule in the Bundesliga that if a club has negative equity, then it is not allowed to get worse the next season. From this season, a club must improve negative equity by 10% a season.” However, it is questionable whether even this escalation will affect Schalke, as the DFL only reviews the balance sheet of the club, not those of its affiliates.

Parallels have been drawn with the financial woes at neighbours Borussia Dortmund, who suffered a series of large losses a few years ago. Indeed, when the Revierderby was played a year ago, Süddeutsche Zeitung described it as “the old champions of debt meeting the new ones.” However, Magath dismissed such talk, “It's a completely unsound comparison. Dortmund were already on the stock exchange and had thus used up all their options. Even though we don't have money to burn at the moment, we do have a number of assets on our side, such as the stadium and the marketing rights.” The problem is that it’s far from clear that the club does still possess these assets, as they now only have a minority interest in the stadium and a lot of the marketing income has been pledged to others.

Bearing in mind all those caveats, up until last year, the club’s profit and loss account looked reasonably healthy. I should note that these figures have been provided by the club and cover the company FC Gelsenkirchen-Schalke 04 E.V., so are not the full group accounts. However, I have seen the Group figures for 2007 and 2008 and the differences are relatively immaterial, at least in terms of the bottom line: 2007 profit – football club €12.6 million, group €12.3 million; 2008 profit – football club €0.5 million, group €1.9 million.

The excellent profit reported in 2007 is largely due to participation in the Champions League. In stark contrast, absence from Europe had a significant adverse impact on the 2009 results, which plunged to a hefty loss of €16.8 million, provoking supervisory board chairman Clemens Tönnies to comment, “The 2009 financial year was anything but a cause for celebration.” The outlook is more positive and the club believes that it “could return to the black” this year. Any guesses why? That’s right – qualification for the Champions League in the 2010/11 season.

In fairness, EBITDA (Earnings Before Interest, Taxation, Depreciation and Amortisation) has been positive for the last five years, albeit declining, implying that the club does at least generate good revenue streams. That is indeed the case with Schalke featuring in the Deloittes Money League list of top 20 clubs by revenue for the last seven years.

Despite no European competition in the 2008/09 season, Schalke still occupy 16th position in the table with €124 million, just ahead of Werder Bremen and Borussia Dortmund, though behind Bayern Munich and Hamburg. Of course, their turnover is still a considerable distance behind the leading clubs with Real Madrid (€401 million) and Barcelona (€366 million), earning around three times as much, largely due to their gigantic TV deals. Schalke’s TV revenue is among the smallest, while match day revenue is also relatively low, which emphasises the importance of commercial revenue. Indeed, this represents very nearly half of Schalke’s total revenue, a proportion only surpassed by Borussia and Bayern.

The eagle-eyed among you will have noticed that the Money League revenue figures are different from those in Schalke’s profit and loss account, which is due to two factors: (a) Schalke’s annual reporting period covers a calendar year rather than a conventional football season; (b) the Money League revenue excludes items defined as revenue in German accounts, such as profit on player sales.

Schalke should be praised for growing their revenue quite well (36% in five years), especially as match day income has remained flat. Commercial income has increased by a third to €61 million, but media revenue is the main swing factor, more than doubling from €16 million in 2004 to €34 million in 2009. When Champions League is included, like in 2008, this revenue stream is even higher (€56 million).

Nevertheless, commercial revenue remains most important, as is often the case with German clubs. A large population, supported by packed stadiums and an extensive free-to-air TV network, makes this a very attractive market for sponsors. Former CFO Schnusenberg had no doubts over the value of maximising commercial opportunities, “It’s very important to us. In Germany, we do not have rich owners, like Chelsea with Abramovich. Competing against them for us is like David against Goliath.” Indeed, Schalke’s commercial revenue is amazingly the eighth highest in Europe, ahead of consistently successful teams like Inter, Lyon and Arsenal.

The club benefits from a number of long-term contracts, such as its partnership with sports rights agency Infront Germany, which runs until the end of the 2017/18 season. Aside from perimeter advertising sales, this includes co-operation in marketing the Veltins Arena. Infront are big players in Germany, having similar agreements with Werder Bremen, Wolfsburg and Bochum.

Schalke also signed a very good shirt sponsorship deal with Gazprom until 2011/12, following former German Chancellor Gerard Schröder putting in a good word with his old buddy Vladimir Putin, though descriptions of the amount vary: €12 million a year (FourFourTwo), €100 million over 5.5 years (Wikipedia) and €125 million over five years (Financial Times). What is clear that the club is unlikely to receive the full amount, as much of the deal is performance related, with a club representative admitting, “The total only exists in theory. That sum can only be attained if we win everything.” Even so, this deal still compares very favourably with clubs in other leagues, being higher than the best shirt sponsorships in both Italy and France.

The kit supplier Adidas has extended its partnership to 2017/18, also covering marketing and merchandising, while the stadium naming rights deal signed with the brewer Veltins runs until 2015. Even the former shirt sponsor, insurance company Victoria, will remain as “a partner for the club and fans” until 2012 after handing over the reins to Gazprom.

The other side of the coin shows Schalke’s extremely low television revenue of €34 million, which is the second lowest in the Money League. The absence of European football obviously did not help in 2009, but the fundamental challenge facing Schalke arises from the small Bundesliga TV contract, relative to European rivals, as evidenced by the three last places in the Money League being occupied by German clubs.

The current deal runs for four years from 2009 to 2013 and is worth €1.65 billion for domestic rights, which works out as €412 million per season. This is slightly higher than the previous three-year contract, which was worth just over €400 million a year, though that did represent a 40% increase on the preceding agreement. The Bundesliga deal is about 40% lower than the €700 million received per season by the Premier League for domestic rights, which is bad enough, but is nothing compared to the disparity on overseas rights, where the Bundesliga only receives €40 million against €550 million for the Premier League. On a lesser scale, it’s a similar situation in Italy, which earns almost €90 million for overseas rights.

Although the new Bundesliga deal represented a double-digit percentage increase, it is still a paltry sum for what Christian Seifert described as “a very attractive product with the largest number of players at the World Cup after the Premier League.” As a result, German clubs receive far less TV money than their English counterparts, e.g. Bayern earned €70 million in 2008/09, which was considerably less than Manchester United’s €117 million.

For the sake of German clubs’ balance sheets, not to mention their competitiveness on the international stage, it is to be hoped that the Bundesliga makes the most of the national team’s success in South Africa and starts marketing itself better globally, as the situation is unlikely to improve domestically. Kirch went bankrupt and even Rupert Murdoch’s Sky Deutschland has struggled to attract new subscribers.

"This is Schalke!"

It’s quite the opposite story for Schalke, who continue to sell out the Veltins Arena, despite raising prices by a average of 4%. Although this will bring in an additional €2-3 million a year, Schalke’s match day revenue is a long way below many of its rivals, even though they have the sixth highest attendances in Europe, only behind, Barcelona, Borussia, Real Madrid, Manchester United and Bayern, due to the moderate ticket prices.

Standing tickets cost just €15, while the club is justifiably proud of the high proportion of tickets it offers at low prices: 31,000 at €25 or less. In addition, Schalke is the only club in the Bundesliga to offer free parking. However, this does mean that clubs like Manchester United and Arsenal earn more than four times as much match day revenue than Schalke.

Given that there are more than 11,000 on the waiting list for season tickets, it does beg the question of why the club does not further increase ticket prices, but this would be completely contrary to German football culture. As Peter Peters explained, “The fans say we only have success because they are here and they create this fantastic atmosphere. It's important. It's not like a jeans shop where people can just go somewhere else. Schalke is their life.” More prosaically, such a move would also damage the relationship with sponsors, who like to see full stadiums, so could end up actually losing money.

Schalke’s costs are around €122 million a year (€140 million including amortisation) with the largest element obviously being wages at €63 million. This is reportedly the second most expensive squad in the Bundesliga, only behind Bayern, but there are clear signs that the club seeks to control this expense. They have maintained the wages to turnover ratio in a very respectable range between 46% and 56% over the last few years, reducing the wage bill last year by €6 million when the revenue dipped. Part of this reduction is because the contracts are very performance related, so poor results on the pitch are at least reflected in lower salaries – every cloud has a silver lining.

That said, the frequent changes in coach have come at a price with former managers like Mirko Slomka and Fred Rütten remaining on the payroll long after they left the club. It’s difficult to say what will happen to the wage bill going forward. Although the club has suggested that it will cut salaries by at least €10 million, the cost for Magath and his management entourage cannot be cheap. Nevertheless, many of the expensive players’ contracts run out in 2011, so there will be an opportunity to address this quite soon. If the club could reduce the wage bill to, say, the level of Borussia Dortmund at €48 million (€15 million lower), that would go a long way to making the club more sustainable.

"Höwedes - an asset in both senses of the word"

Another option, albeit an unpalatable one, would be to sell some of the players to raise much-needed cash, as most of the family silver has already been sold. Indeed, there has already been plenty of speculation over the future of goalkeeper Manuel Neuer and defender Benedikt Höwedes. However, this would potentially hurt the team’s prospects of European qualification, thus losing those funds, so it’s a double-edged sword. Furthermore, if clubs suspect that sales are inspired by financial difficulties, they might well exploit this weakness by making much-reduced offers.

The club is undoubtedly making all the right noises, stating that “the era of debt making must be over.” After the 2009 results were released, they announced, “A difficult year has been safely navigated and the foundations for a successful future have been laid.” With regular participation in Europe, that might be the case, though it will be difficult to know for sure without more transparency. Let's hope so, as few would begrudge the long-suffering legions of fans of this grand old club some over-due success.

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