FFP - as I understand it

I get the impression from reading a few posts on here that some still fail to really grasp FFP and the club’s financial position. The following is reworked from part of an article I wrote for AKUTR’s earlier this season with some additional details taken from a post on Loft For Words by Clive Whittingham which help to flesh it out.

The current FFP regulations state that that a Championship club is not allowed to lose more than £39 million over a rolling 3-year period with the third year being based on a projected figure for the current season. This figure assumes that the owners are prepared to inject equity to cover the losses; these can only be £15 million if they are not.

Our last set of published accounts, which are for the year ending May 2016 show a £11 million loss. Before anyone gets too excited thinking 3 of those would be comfortably under £39 million so what is all the fuss about, let’s just examine what was in those accounts. Firstly there was a parachute payment of £24million. This dropped to £19.3m for last season and has dropped again to £9.6 million for this and next season. Secondly that season's accounts also included £4 million from Charlie Austin’s sale to Southampton and our proceeds from Sterling’s transfer from Liverpool to Manchester City, believed to be £10million or thereabouts. Yes, we did have a few high earning players that season such as Sandro, Green, and Fer, but it is also worth remembering that Caulker was out on loan with all his wages covered initially by Southampton and then by Liverpool and incredibly Ferdinand even managed to get a couple of loan fees for him.

To make matters worth, it is my understanding that player’s transfer fees are spread across the term of their initial contract, so the final £2 million of the £8 million we paid for Caulker back in July 2014 will be in lodged in this year’s accounts. There will be smaller amounts to include for the purchase of players such as Washington, Luongo and Smithies as well. Agents’ fees are also treated in this manner as Les Ferdinand was quick to point out when it was revealed that QPR paid more than any other Championship club to agents in the period from 1st October 2015 to 1st February 2016. Ferdinand confirmed that the bulk of the agents’ fees paid in that period were for historical transfers from when the club was in the Premier League, and included some for players who had already left the club.

Lee Hoos has been very open about the operating costs of the club which are in the order of £9 million per year to run. This covers the cost of Loftus Road, training facilities, match day costs etc. The annual revenue from season ticket sales is £5.6 million, so before we’ve even considered paying any player or member of staff a penny in wages we are short by £3.4 million, let alone trying to budget for future transfer fees. General ticket sales, club shop sales, matchday catering and programme sales cannot possibly close that gap.

Hoos has also been very clear about the money coming into the club. When we were in the Premier League our biggest revenue stream was, of course, television money. Since our relegation it has been the parachute payments. When these stop at the end of next season, season tickets will be major source of income.

We’ve already breached the FFP regulations once and are still awaiting the final verdict (within the terms of that process the club are not allowed to discuss this until our punishment is announced), should we breach them again it is a near certainty that we will be put under a transfer embargo until we meet their criteria. This would inevitably result in a fire sale of our better players and the decimation of our squad. So just how badly do you want to gamble the club’s future on a new striker who may turn out to be the next Mike Sheron, or another central defender to go along with the 12 we’ve already got?

 

I still believe that FFP is totally against the smaller clubs.

 

Evening Roller. It's staggering that some of our fan base simply don't get what FFP is about and the restrictions that the club is operating in, I mean some even think that we're going to get Austin back in January!!!!!!!!

The article that Clive posted on LFW was also linked to on here so everyone had the chance to read it and take on board where the club is financially, but maybe there's a lot of denial around at the moment.

Anyway nice post Roller, hopefully the penny will drop at some stage.......

 

I am just off to leap off Cromer pier!

 

Careful HE with the gale that's blowing at the moment you might be blown back on land......

 

Basically, to sum it up in two words...'we're f*cked'...

 

In words of one syllable, yes.

 

Not at all. We've been cutting our cloth accordingly. Take this summer's transfer activity which was pretty much based on a one in one out basis, but each one an upgrade. Scowen for Henry, Wheeler for Doughty, Osayi-Samuel for El Khayati. I'd guess we are paying the new boys less than the old, but we have got better players.

We still need to trim further. I don't see much happening in January, but come the summer Caulker's and Onuoha's contracts are up; there is a considerable saving to be made there. When Ollie said he'd need a few transfer windows to sort it out, it wasn't because he wanted several overhauls of the squad, it was because that is the only way we can get rid of players on overly generous contracts. Looking at the players that we've brought in recently, like those I've just mentioned and Freeman, I'm hopefully for more of the same when the spaces become available in the squad.

 

A good summary, Roller. There's something unhealthy about confidentiality rules that the Football League enforce on a club during a dispute to gag it, particularly after an arbitration is over. If this was a normal commercial dispute, it would probably be heard in open court.

Agree with Col, that FFP is weighted heavily in support of clubs with a large fan base.

 

Fair points Roller but we are sitting ducks for the wealthier Championship clubs who are likely to cherry-pick our better players which will make natural progression so much more difficult. Also gate revenues will be down as we are not attracting the same gates as previous seasons. As others have stated on here there's nothing fair about FFP, it's a safeguard for the big guns...

 

So basically, the only real way for ward is to get together a team of relatively unknown players, throw in the odd rough diamond, get an experienced manager who can steer you to the PL then gradually consolidate in the Pl once you've got there.

It would be great to have a chance to do that...oh wait...

 

Is the £39m over three seasons the current account losses, ignoring accumulated debt? And can we just add the FFP fine for the original transgression, whenever it is revealed, to the debt, rather than the current balance sheet?

So the end result is a club which can sustain itself on very much less than £10m pa income, unless we fluke a major player sale (that’s what we are growing the kids for!), or at worst make a loss of less than £13m a year, which the owners presumably have to service, while the club debt grows.

Everyone else is in the same boat I suppose, and there must be a few clubs with an even lower income base than us. Most have cheaper season tickets for a start......

 

I read the projection for the 3rd season the current season is due by 1st March, so won't be surprised if the Club gets good offers in Jaunary that we will have to sell players we can to meet the £39 million loss limit. Hopefully a wealthy PL Club will pay us millions for Smithies, we can recall Ingramm, sell off one or two of our overloaded midfield reserves, and Holloway has a prolific striker tucked away somewhere he can bring in for a fiver.

 

Roller, thanks for a very sobering reality check on our tight-rope financial situation. They are he facts, even if not pleasant reading. I think that we all need to get used to this new business model reality.

What is shocking, and probably even unethical, is the "gap" of "universal dimension" between the current practices of the top spending football clubs (City, PSG, Barca, Real, United, etc). This vaste disparity in modern professional football which is overheated by both TV and sheikh/billionaire money is simply not sustainable on the long term. I am sure that it must burst or there will be a genuine seperation of the leagues.

 

In my mind, there already is.

 

Very true. In theory "no", but in practice "yes".

I am sure teams like PSG will not want in the future to play in the French League 1 but in a permanent Champions Champions League set up. Today they splash out 222M€ for Neymar and we are pleased to sign a gem like Luke Freeman for 315KGBP. One game but already two different worlds already, and I am sure it will get worse! Plus ironically, it QPR that are under FFP scruntiny! A crazy world!

 

The rolling three seasons does ignore what has gone before (otherwise the big boys would be in desperate trouble) and any FFP fines are excluded from the figures as are expenses such as investment in youth development and training facilities.

The debt can "only" grow at £5 million per year, the owners would have to inject funds to ensure that.

 

We are a selling club. Any serious offer will have to be considered. It is, unfortunately, the only way forwards. We will have to accept that one of our best ways of financing the whole is to develop and then sell players. Josh Bowler is a fine example.

It will be frustrating at times, but no different to the days when we had to sell Paul Parker, Darren Peacock, Andy Sinton and Les Ferdinand, we just need to ensure that the replacements are more Trevor Sinclair than Mark Hateley.

 

It’s with that basic understanding of the money that you have to build a club with a basic footballing philosophy, at every level, so the personnel can change but the style remains. I think Les has talked about this, and I hope it’s what we are doing. Can’t say I’m entirely clear what our first team style is, but it’s a bit better than a couple of years ago, until Matt Smith comes on.

Post more Roller.

 

It really is about time that a club challenged this nonsense in the courts. It is a clear encouragement of anti-competitive practices that the EU and others profess to outlaw. For the life of me I don't see why that can't be QPR who at least have a board that can fund the best international lawyers. What do we have to lose?