Good Morning. It's Thursday 5th September, and here are the Leeds Utd headlines Derby, Reading and Sheffield Wednesday investigated over FFP loophole According to The Times, the English Football League have launched investigations into Derby County, Sheffield Wednesday and Reading over their actions to try and avoid FFP penalties. The report explains that the EFL have launched independent valuations on Derby, Sheffield Wednesday and Readings Stadiums as the trio of clubs tried to exploit a loophole in profit and sustainability rules by purchasing their own stadiums and leasing them back, thus raising enough revenue to stay within the 39m deficit over a three year period. However, whilst the trio of clubs may have thought their concerns were over, with no rules being broken, The Times has revealed that may not be the case. The Times says that Morris (Derby) used a separate company to buy the ground for £80m, with a deal to lease it back to the club. Leeds Chairman Andrea Radrizzani has been vocal of hid Derby Counterpart especially after the fuss they made over Spygate. Speaking at the Financial Times Business of Football Summit, he said: "We should revisit the rules. We were judged as a cheating club when we sent a scout to watch [Derby] training, so they should take a similar view on what I would say is greater cheating by these clubs. “For me if it’s cheating to send a scout in a public street, what should be the punishment of selling the stadium to a sister company to increase income of the clubs?” please log in to view this image Bamford turns down Republic of Ireland to concentrate on Leeds Republic of Ireland fans have been laying into Leeds striker Patrick Bamford on social media over his reluctance to switch his allegiance to Mick McCarthy's team as he wants to be fully focused on Leeds. “I spoke to Mick and he asked me to basically change over nationality for the summer games and I said ‘look I had a bad injury last year and I want to concentrate interest of the season with Leeds,” he said. "I am not saying no, I am just concentrating on Leeds. I haven’t closed any doors, I have not said yes, I have not said no.” please log in to view this image Kinnear - “We’re not desperate for investors” In a recent interview with the BBC, Leeds Managing Director Angus Kinnear was asked if Leeds were close to taking on another investor, after the San Francisco 49ers brought a stake in the club last year. “We’re not desperate for investors,” Kinnear replied. “Andrea has been very clear on this but he’s prepared to bring a partner on board if it moves the club more quickly in the right direction or in a sustainable fashion. “So it’s not surprising that we have lots of interest because we’re one of the most investable propositions in world football. “We’re a one-club city, fantastic stadium, fantastic supporter base, everyone knows we should be in the Premier League, so there’s interest all round the world in terms of investing, but Andrea and I are being patient, we’re waiting for the right person and the right deal and making sure it’s someone we can work with in the long run.” Kinnear went on to say that it was important to get the right investors – like the 49ers – who weren’t disruptive in terms of how the club is run. “They’re supportive, they’re not intrusive and that’s what we’re looking for in another partner.” please log in to view this image
Good Morning to Matt and co from a very chilly Bardsey the Cowley bros turned down a wage increase 10 times what they are earning at Lincoln I think they are looking at the Wed job which will give them more money and Lincoln will also benefit as they will be paid £1m in compensation It would appear that Jack Clarke will be sent back to Spurs in Jan so he can be loaned out to play more games Deby Reading and Sheffield Wed could have a 15pt deduction if found guilty of what tanatamounts to fraud I bet they regret spygate now My very lovely grandson who is travelling in India and Vietnam working to help the poor people lost the tip of his finger holding a door open for a lady He says he's insured but his bill so far is £700.I have suggested keeping his receipts and Moe told him to get a cover to put over the bandage Naturally we sent him so money to help him in the meantime and to go to A'E when he arrives today in New Zealand Talking of New Zealand made me very envious as I always wanted to visit the country but medical insurance would be too expensive for me
Morning all... I hope Derby get hit hard, Morris was painted as being such a saint on Jim Whites talk sport.
Derby, there is a saying "What goes round,comes round" In otherwords be careful where you throw the sh-t as it has a habit of coming back at you. Hope Morris gets the book thrown at him but somehow I have my doubts. Bamford good on you lad look to who pays your wages first.
Nice one Radz, vengeance is best served cold, everyone has forgot about the spy gate crap, Radz hasn’t, the FA is getting backed into a corner and must investigate, if they don’t they shall be wide open for criticism and allow other clubs to use the loophole. Our club is looking healthy, being run in a correct way, much of the deadwood has gone, the squad has never been as strong, happy days.
They should look at the Rooney deal as well for. See how much the sponsors are paying and how many “assistant coaches” are being paid nearly £100K a week
I wonder how many complaints the BBC would get if that brilliant programme was aired nowadays, actually wouldn't have hit the screens I suppose. Like all dad and sons we had our differences. He was a scummer and loved Best, I Loved Leeds and Bremner. He loved Jim Reeves me Robert Plant but one thing we always agreed on was our comedy tastes, 'til death.....Dave Allen...Tommy Cooper...Spike Milligan.great stuff.
Derby County: Respectable? If we have one pet hate here at the Price of Football it’s clubs who announce their results on the club website via a press release, but don’t publish them. Such behaviour usually is accompanied by a greatest hits tour of many impressive increases in some key financial figures, but not all the information is disclosed. The local newspaper writes up the press release in good faith, and the fans swallow the narrative as dictated by the club. The club relies on everyone then losing interest in the finances (and rightly so, we don’t love our clubs because of their balance sheets after all) and later the accounts are sent to Companies House, but no one shows any interest is them, apart from saddo blog writers. A textbook example of this is what has happened at Derby County in their financial year ended 30 June 2017. Their press release showed the results of the club for the year but failed to include that about 100 employees appear to have been transferred to different companies, so the comments on the wage bill, whilst being legally correct, were at best disingenuous, and certainly misleading if you were trying to compare like to like. What the press release failed to mention was the activities of Derby’s parent company, the snappily named SevCo 5112, which now controls the club’s academy, catering and communications activities via newly created companies. It’s a bit like me telling the wife I’ve been out for an evening for the lads for a few pints and a curry but omitting to mention the £500 of gambling losses at a local casino and the two lost hours in a cocaine and hooker related orgy. To make murky matters even murkier, SevCo’s accounts only cover 10 months in 2016/17, instead of a full year. Perfectly legal, and no doubt there’s a logical reason for this to be done, but it muddies the waters further. Summary of key figures (Derby County Football Club Ltd) Income £28.7 million (up 29%) Broadcasting income £7.9 million (up 41%) Wages £34.6 million (up 4%)…or should it be an annualised £39.8 million, up 12% (Sevco 5112)? Loss before player sales £23.3 million (down 15%) Player purchases £21.2 million Player sales £23.2 million Borrowings £143.7 million (SevCo) Income In the Championship the amount of total income is effectively split between those clubs that do and do not receive parachute payments. Derby’s overall income was the third highest for a non-parachute payment receiving club. but this was not enough to get the club into a playoff position, although Brighton and Huddersfield, both of whom were not in receipt of parachute payments, were promoted, and Sheffield Wednesday made the playoffs. please log in to view this image Only Newcastle (surely Mike Ashley has nothing to hide?) and recently sold Barnsley have yet to announce their results for 2016/17. Most clubs are showing higher income than in the previous season. The average income of the 22 clubs that have reported to date is £28.6 million. This compares to an average of £22.9 million the previous season. The main reason for the increase in overall income is due to a combination of higher parachute payments, a new TV deal in the Premier League, which drips down to the Championship in what are called ‘Solidarity Payments. Championship clubs earn about £4.3 million a year from solidarity payments, plus their earnings from the Football League TV deal which are worth a minimum of a further £2 million. Championship clubs also pick up £100,000 for each home game broadcast on Sky, and £10,000 for each away game. The English Football League (EFL) negotiated a flat percentage of all future TV deals with the Premier League (PL) a couple of years ago. This at the time seemed to be a great deal, but subsequently the PL sold its domestic rights for 10% less in 2019-22 than the current three-year arrangement generates. Like all clubs Derby earn their income from three sources, matchday, broadcasting and commercial/sponsorship. please log in to view this image Derby have shown growth in the all three income areas, but to give some context, their total income of £29 million is still nearly £20 million less than their final season in the Premier League in 2003/4, when income was £48.6 million. Matchday income in 2016/17 was up 4.5%. Initially the club stated that average attendances for 2016/17 were an impressive 29,085, just, 2% lower than the previous season when the club were knocked out in the playoffs. A recent press release contradicts the initial attendance figures, and the average figure for 2016/17 is restated at 27,885. Presumably the club either increased ticket prices in 2016/17 or had more hospitality tickets sold. The club’s attendances have been healthy for the last few years, but it appears that they have increased ticket prices during that period. If the attendance figures are to be believed the club made £311 per fan from matchday receipts, not a rip-off figure, but it has increased by over a third in the last five years. please log in to view this image Derby therefore had the seventh largest matchday income total in the division, although we anticipate this falling to eigth when Newcashley United finally publish their results. please log in to view this image Broadcast income was up 41% to £7.9 million. The baseline figure for clubs in the Championship is about £6.3 million, plus an additional £100,000 for every home, and £10,000 for every away game that is broadcast live on Sky. Derby are always popular with Sky as they generate decent viewing figures. The impact of parachute payments for the top six clubs in the chart is very evident. Recently relegated Norwich earned £7.50 from broadcasting for every £1 earned by non-parachute payment clubs. please log in to view this image Derby’s commercial income rose by an impressive 44% to £12.4 million. This heading covers a multitude of activities, which to be fair to club they have laid out in the accounts well. please log in to view this image Some figures do cause eyebrows to raise. Merchandising is the same as the previous season, sponsorship increased by £2 million apparently due to a joint venture with a company called Delaware North Companies UK Limited who operate hospitality for the club, and another company called Stadia DCFC Limited to ‘monetise sponsorship, social media and non EFL TV rights’. What seems strange is if these new companies were set up, why is the football club taking credit for the revenue from these sources? Costs The main costs at a football club are player related, wages and transfer fee amortisation. Here things get confusing. According to the football club accounts, wages increased by a relatively modest 4% to £34.6 million in 2016/17. Immediately after the wage note is a table that summarises the number of employees. please log in to view this image On the face of it the club has either made redundant, or has had resignations from, 99 employees in 2016/17. Most noticeably is the reduction in players and apprentices, until a trawl through Companies House reveals the existence of a company called Derby County Academy Limited, created in May 2016. The contracts of the apprentices and youth coaches etc. have been transferred to this new company. Perfectly legal, but it makes a mockery of the club’s press announcement that wages rose by 3.4% if so many former employees are now working for another company in the group. Derby County Academy Limited take advantage of a legal loophole to avoid showing that company’s income, wage bill and employment totals, so we therefore scrutinised the accounts of parent company SevCo 5112. please log in to view this image It therefore seems that SevCo 5112, which owns the Academy, Sponsorship and Stadium companies as well as Derby County Football Club Limited has expanded operations, and that’s great, job creation is to be applauded. SevCo 5112’s wage bill decreased in 2016/17, but the accounts only cover a ten-month period. If the wage total is extrapolated for a year it works out please log in to view this image SevCo 5112’s wage bill decreased in 2016/17, but the accounts only cover a ten-month period. If the wage total is extrapolated for a year it works out as £39.8 million, which is an increase of 12%. There’s nothing wrong with this, you would expect wages to increase if there are more people employed after all. It’s the lack of transparency from the club’s press release that concerns us when it stated… please log in to view this image What the club have said is true in relation to Derby County Football Club Limited, but it is also incomplete. If the club is incomplete in relation to this issue, it begs the question are there other key activities and transactions that it would rather not disclose in the press release, which instead focussed on the far more entertaining and salacious tale of the club suing a former executive, who in turn is counterclaiming against the club. please log in to view this image It’s therefore tricky to get a true handle on what has happened in terms of wages at Derby. If we use the SevCo totals, then the following trend arises. please log in to view this image Wages at the overall operation therefore seem to have trebled over the last five years. This shows a commitment to investing in players who will be of the calibre to help the club achieve promotion. SevCo 5112 paid out £137 in wages for every £100 in income, which is effectively why Mel Morris says the wage bill in unsustainable. Derby are not along though in paying out wages that would not be tolerated in other lines of business, over half the clubs in the Championship pay out more money in wages than they generate in income. This is under the auspices of Financial Fair Play (FFP). It is scary to think what would happen if FFP didn’t exist. please log in to view this image Amortisation is how clubs deal with transfer fees in the profit and loss account. For most clubs when a player signs for a club the transfer fee is spread over the life of the contract. Therefore, when Derby signed Matej Vydra from Watford for a record £8 million on a four year contract the amortisation charge would normally be £2 million a year for four years (£8m/4). The amortisation fee in the profit and loss account therefore includes all players who have been signed for a fee (assuming they are still in their initial contract). please log in to view this image Derby’s total amortisation charge has risen steadily in recent years, reflecting the brakes slowly being removed from the transfer budget. They are in the top half of the division in relation to this cost, but some way behind clubs with parachute payments. please log in to view this image If the amortisation costs are added to wages, then total player costs for Derby in 2016/17 were £152 for every £100 of income. This again suggests the club is relatively ambitious in terms of spending whatever it takes in terms of player investment to get back into the Premier League. We then however come to ‘The Derby Way’ ((c) Mel Morris). Derby’s amortisation charge is based on (cost-residual value)/contract length. It looks as if Derby have managed to reduce their amortisation charges each year by allocating what is called a ‘residual value’ to players. This is an estimate of their market worth of players when they are no longer required. please log in to view this image The problem with this (and here we enter accounting nerd territory) is that this appears to go against the accounting rules, which state that the residual value should be zero unless certain conditions apply. please log in to view this image
Unless Derby can show that they have commitment by third parties (i.e. other clubs) to buy players a year or two in advance then clause (a) does not apply. please log in to view this image Football players do not seem to fall into the realm of being in an active market either because they are not homogenous (i.e. identical) as Tom Ince is different to Bradley Johnson , and there are not willing buyers and sellers at any time so Derby appear to be in breach of the rules. Should anyone care about this? Well…by applying residual values it allows Derby to effectively increase or decrease the annual amortisation charge, and this could have an impact on FFP compliance. Derby’s amortisation charge as a proportion of player costs is lower than that of any club in the Championship. If they have a lower cost here…then they have a higher profit figure. please log in to view this image Over a long period of time figures even themselves out, but by adopting such a policy, which appears to be in breach of accounting rules too, Derby have the ability to increase or decrease losses in individual years to satisfy FFP…that doesn’t mean they have done it though! Profits and losses Profits (or more commonly for non-Premier League football clubs losses) are income less costs. The bad news for Derby is that the club lost a lot of money last season from day to day trading. The good news is that they managed to sell Hendrick, Ince and Hughes, which brought in a profit of nearly £16.2 million, which offset the operating losses. Operating losses are income less the running costs of the club (wages, maintenance, insurance, amortisation etc. and they are before deducting interest costs and player sale profits. In 2016/17 this worked out as £23.3 million, or £448,000 a week. This is £4.5 million lower than the previous season but remember this excluded the wage bill for the 99 employees whose contracts appear to have been transferred to other companies. are now still a lot of money to find on a regular basis. If we look at SevCo’s profit and loss account for the ten months to June 2017, this shows an operating loss of £27.7 million, which works out as £630,000 a week. If this was extended to twelve months, it would work out at £32.7 million Their total operating losses for the last five seasons of Derby/SevCo are over £87 million, and this excludes one off costs of £6.4 million during that period too. Fortunately for Derby the sales of Ince, Hughes and Hendrick cushioned the financial blow to an extent (although Derby fans would probably rather have kept their best players). The sale of Tom Ince raises another eyebrow. The sale was announced on 4 July 2017, but Derby’s profit and loss account ended on 30 June 2017. https://www.derbytelegraph.co.uk/sp...s/highest-transfer-fees-received-derby-168528 The sale of Will Hughes took place on 21 June, which suggests the club was keen to dispose of both players to reduce their stated losses. Derby have struggled to sell players on a regular basis at a profit historically, which suggest poor recruitment, but 2016/17 was a huge improvement. please log in to view this image If the club fail to be promoted this season via the playoffs (and we hope they are successful, on the grounds that they are not managed by Neil Warnock), expect to see interest in Vydra after his spectacular goal scoring record in 2017/18. Under FFP rules, Championship clubs can make a maximum FFP loss of £39 million over three years in the Championship. Derby have a pre-tax loss of just £33 million over the three-year period, helped by profits on player sales and £12 of income from some accounting sleight of hand in 2016 that we expect will be disallowed for FFP purposes. Additionally, some costs, such as infrastructure, academy and community schemes, are excluded from the FFP calculations. Derby have a category one academy, which costs about £5-6 million a year to run according to our sources, so this, combined with other allowable costs and player sales, means that Derby are within the FFP limit for the three years ending June 2017. Player trading The accountants treat player trading in a weird way in the financials. We’ve already shown that when a player is signed, his transfer fee is spread over the life of the contract. When the player is sold, the profit is shown immediately, and it based on the player’s accounting value, not the original transfer fee. This creates erratic and volatile figures in the profit and loss account. If we instead focus on the actual purchase and sales, the following arises please log in to view this image Over the last five years Derby have bought players for £65.1 million and generated sales of £26.3 million. If Derby are promoted to the Premier League there are additional transfer fees and player bonuses of £16.6 million. please log in to view this image Debts to and from the club The best way to look at Derby’s debts is to focus on the accounts of SevCo 5112 Ltd in conjunction with those of the football club. please log in to view this image The easy bit is player transfers, where the club is owed £20.4 million for players sold (likely to be for the players we have mentioned before) and owe other clubs about £17.2 million. The football club is owed £13.7 million from ‘group undertakings’. Our suspicion is that Derby County Football Club Limited is still paying the wages and costs of the new companies that have been set up when employees were transferred to these new entities. This is because the likes of the academy generate no/little income themselves to pay the bills (we’d like to be able to prove this, but the academy company also takes advantage of a legal loophole to avoid showing its profit and loss account). SevCo 5112 owed Mel Morris over £95 million at 30 June 2017, and he’s subsequently given them a further £21 million to keep them afloat since that date. This appears to be interest free, which is good to see. Gold and Sullivan at West Ham charge interest of 4-6% on their loans. please log in to view this image please log in to view this image SevCo have other loans of about £45 million on top of Mel Morris’s generosity. SevCo has received £161 million since 2015 from investors in the form of loans and shares. please log in to view this image Group Structure If anyone is still reading this, things are about to get a bit messy in terms of the corporate structure of the club in recent years. In the beginning there was God (also known as Brian Clough to Rams fans) and all of Derby County’s finances could logically be found in the accounts of Derby County Football Club Limited. This company was founded in 1896, and every year produced its results, which showed the finances of the club completely. In 2008 the club was purchased by American based General Sports and Investment, who ran Derby through a company called Gellaw 101 Limited, which in turn was owned by Global Derby (UK) Limited. This had relatively little impact on the accounts of Derby County Football Club Limited as the other companies effectively didn’t trade. Global Derby (UK) Getlaw 101 Ltd Derby County Football Club Ltd Derby County Football Club Limited was then purchased by Mel Morris in September 2015 via the delightfully named Sevco 5112 Limited. The accounts for 2015/16 for Derby County Football Club seemed in line with the previous season in terms of all the figures. However, and this is where things get a real pain, some new companies were set up by SevCo 5112 Ltd, which is perfectly reasonably, as similar things happen at other clubs, and included the likes of: Club DCFC Limited (events and catering) Stadia DCFC Limited (sports and broadcasting) The Derby County FC Academy Ltd (academy) It looks as if these new companies have costs in the form of employees and running expenses, but generate little income themselves, as this seems to go through the books of Derby County Football Club Limited. Perfectly legal, but it all comes out in the wash when looking at the accounts of SevCo 5112 Limited. It’s just a shame that this is ignored in the press release and by the local media, who perhaps (a) couldn’t care loss as they are Rams fans who just want to see the club promoted and/or (b) don’t want to upset the club by sticking their noses in as fear being denied access for interviews, as happened at Middlesbrough this season. Summary Derby have invested heavily in players in the past couple of seasons and have a decent chance of promotion via the playoffs. Mel Morris has backed managers in the transfer market, but by his own admission this cannot continue indefinitely. The attempt to control the narrative by not releasing the full accounts for the club and the holding company in the press release does the club’s reputation no favours. People can only make informed decisions and judgement when given full information. please log in to view this image Note: The wages for 2017 are for SevCo 5112 annualised.
Let's have a look at Leeds Standing on the brink of promotion to the Premier League, playing exciting football and with a cult hero as a manager, Leeds United are cool to like again. The club’s recently published accounts show that this success hasn’t come free but by the standards of the Championship Leeds have been a model of restraint compared to other owners who have gambled with the existence of their clubs. Elland Road regulars have plenty of experience of improper owners and at present they seem to be operating with a competitive budget without going overboard. Very few clubs get promoted making a profit and whilst Leeds are unlikely to do so themselves at least the level of losses incurred will be modest compared to other clubs who have gone up recently. Revenue EFL rules encourage clubs to split their revenue into at least three categories, matchday, broadcast and commercial. Every club is trying to maximise all revenue sources at present due to rapidly rising wages, but Leeds were one of the very few who have been in the Championship for a few years to increase all type. Various other revenue streams are also shown by some clubs (Leeds separate out catering and merchandise for example) but for the purposes of consistency they are all added to the ‘commercial’ heading. please log in to view this image Average attendances at Elland Road were 31,521 in 2017/18, up nearly 4,000 from the previous season, which contributed to a 10.6% increase in matchday income. please log in to view this image Nearly all the additional matchday income came from higher attendances as average revenue per fan has been broadly static for the last five seasons, with 2012/13 being higher partly due to good cup runs that season. please log in to view this image Sunderland, Sheffield Wednesday and Bolton haven’t published their results for 2017/18 yet (all three have reasons to hide the numbers) but for a team that finished 13th in the Championship last to have the second highest matchday income in the division is a sign of the club’s potential. please log in to view this image Income from broadcasting is a thorny subject for Leeds fans as whilst they are regularly chosen for live matches on TV this causes maximum disruption for fans planning their weekends and minimal extra income for the club. Sky pay £100,000-£140,000 for home Championship matches (and £10,000 for away matches) but compared to parachute payments for those clubs relegated from the Premier League this is miniscule. please log in to view this image Non-parachute payment receiving clubs such as Leeds start each season in the Championship at a huge disadvantage, with research showing that those clubs recently relegated have a seven-point head start due to their extra PL funding. On the other hand, some sides recently such as Sunderland and Wolves have dropped straight out of the Championship into League One despite receiving parachute payments, mainly due to having disaffected players on huge contracts refusing to move on due to the money they are earning. please log in to view this image The revenue generated from commercial deals and sponsors is where Leeds had the most impressive growth in 2017/18, with an increase of 33% compared to the previous season. please log in to view this image First in the commercial income table by a street is an impressive performance by Leeds as the club leveraged on the goodwill towards the new owner and made the most of being a big single club city. Income from commercial sources in the Championship included catering (up by £1 million) merchandising (up £1 million) and general sponsorship (up £3 million) but overall Leeds success here helped give additional funds to be reinvested into the playing squad. please log in to view this image The fact that Leeds had more commercial income than half the clubs in the Premier League shows that the potential here is significant if the club is promoted. please log in to view this image Total income over £40 million is very impressive for a club not in receipt of parachute payments and should ensure Leeds are competitive at the top of the division regardless of whether they go up. please log in to view this image Costs Overall costs for Leeds increased significantly in 2018 and it will come as no surprise to fans that this was driven mainly by a rise in player costs. please log in to view this image Staff costs rose by over £10 million in 2017/18 although this would include redundancy payoffs for Thomas Christiansen and Paul Heckingbottom (along with their coaching staff). please log in to view this image Nevertheless, despite this increase Leeds were only about mid-table in the Championship wage table last season, as the clubs with parachute payments were able to afford higher sums to players and management. please log in to view this image In terms of wage control Leeds, despite the increase in costs, only paid out £77 in wages for every £100 of revenue, compared to a Championship average of £108. For any club in the Championship it is a constant battle between gambling on player investment to increase the chances of promotion which if unsuccessful could put the whole future of the club in the balance. Financial Fair Play (FFP) in theory was introduced to try to prevent this but doesn’t seem to have worked in the Championship to date, with last minute rescues of the likes of Villa and Bolton being the only reason these clubs haven’t gone into administration or worse. Birmingham being fined 9 points is hardly surprising given that the club spent more than twice their revenue on wages, what is surprising is that other clubs have not been subject to a similar fate. In terms of transfer fees, these are spread over the life of the contracts signed by players in what are referred to as amortisation costs. Ezgjan Alioski was signed by Leeds for £2.2m from Lugano in August 2017 on a four-year deal, so that would normally work out at £550,000 (£2.2/4) a year in amortisation costs. please log in to view this image
Leeds continued Leeds total amortisation cost, which is the figure that represents all transfers, increased by 50% in 2017/18 as the club invested in Forshaw, Jansson, Saiz, Roberts, Alioski and others for million pound plus transfer fees. please log in to view this image Spreading transfer fees via amortisation reduces the volatility of the cost of transfer fees in a single season and reflects a club’s long-term spending on players. please log in to view this image Amortisation and wages together as a proportion of revenue was 97%, which meant that Leeds had little left to pay for the other day to day running costs of the club, such as rent (£2.2 million) depreciation (£1.6 million) and so on, with ‘other costs’ in total coming to over £17 million. please log in to view this image Profits and losses Subtracting costs from revenue gives a profit or loss figure for the year and Leeds had an operating loss from day to day transactions of just under £20 million for 2017/18. please log in to view this image Big losses are incurred in the Championship by nearly every club as owners commit to pay the wages and transfer fees on signings that they hope will result in promotion. please log in to view this image In the Championship losses were £505 million last season (and that is without Sunderland, Sheffield United and Bolton) which shows the extreme pressures of trying to compete in the division. Championship clubs all made operating losses last season and the only way for these to be financed is via player sales or owners investing money via loans or shares. please log in to view this image Yearly profits from player sales have been beneficial for Leeds recently, and Liam Bridcutt’s and Chris Woods’ departures, along with some sell on clauses on previous disposals, were the main drivers of the £18 million profit on player sales last season that absorbed most of the operating losses. please log in to view this image Championship clubs managed to recoup over £210 million of the losses via player sale profits but this still leaves a big gap to be plugged by owners. Letting players go does generate cash but also has a detrimental impact on the quality of the remaining squad but is a financial necessity at times, fortunately for Leeds good cheap recruitment and an impressive academy scheme have improved the quality of football this season. Excluding costs such as amortisation and depreciation (depreciation is the same as amortisation except this is how a club expenses other long-term asset such as office equipment and properties over time) then another profit figure called EBITDA (Earnings Before Income Tax, Depreciation and Amortisation) is created. This is liked by professional analysts as it is the nearest thing to a cash profit figure. please log in to view this image Struggling to generate cash from operations is common in the Championship but is does mean that clubs must increasingly hope that owners will make up the deficit. EFL rules allow clubs to lose for FFP purposes (officially called Profitability and Sustainability in the Championship) £39 million over three seasons, but some costs (infrastructure, academy, women’s football and community schemes) are excluded from the calculations. An estimated P&S profit of £1.6 million over the last three seasons suggest Leeds, even if they are not successful this season, are well within the limits and would not need a fire sale of players during the summer of 2019. The actual details of P&S calculations for EFL Championship clubs are unknown, prompting much speculation and anger amongst fans who are unsure whether or not their club is subject to ‘soft’ sanctions, which are not publicised, but Leeds are almost certainly not being punished for these given the relatively prudent way the club is run. Player Trading Leeds spent £28 million on new signings in 2017/18 on many signings as the two new managers tried to mould squads. The sale of Chris Wood offset a large proportion of these player purchases. please log in to view this image The large spend on players is why the amortisation charge in the profit and loss account is so high. Fans often point out that clubs also sell players and that net spend is a better measure of a club’s investment in talent but again Leeds here have been relatively modest by the standards of the division. please log in to view this image Leeds have been building up the squad in recent seasons, which had a total cost of £37 million at then end of 2017/18. The appointment of Bielsa as coach in the summer of 2018 resulted in a further estimated net spend, mainly on Patrick Bamford, of about £4 million. please log in to view this image Funding Clubs can obtain funding in three ways, bank lending, owner loans (which may be interest free) or issuing shares to investors. The tie up with SF49’ers brought in share investment of £11 million and there was net borrowing of about £2.5 million in 2017/18. Summary Leeds had a hit and miss season in 2017/18 on the field, but the club’s strong revenue growth meant that it was in a strong position from an FFP perspective at the start of the current campaign. It’s on a knife edge at present whether the club will go up automatically, but a playoff position is guaranteed. Promotion to the Premier League would see revenues rise by at least £100 million and the club is in a strong position given the size of the city and its history to sign some lucrative deals. Leeds are certainly one of the best three teams in the division this season, but their biggest problem might arise is if they have a chance and fail to make automatic promotion on the last day of the season if the playoff positions are already finalised, as their potential opponents could rest the squad for the final fixture. Promotion this season will be great for fans, but even if they fail to do so the club is in a strong position financially both in the short and medium term from the figures it has published. Date Summary please log in to view this image
