Football Transfers and Creative Accounting: Protect me from what I want

It’s the disease of the age, It’s the disease that we crave.

When Derby County published their response to the EFL charges for financial misconduct on Friday 17th January 2020, it included reference to ‘the newly notified charge of intangible fixed asset amortisation’.

The nonsense below is all about the said subject, but extended to how clubs can increase or decrease costs in the accounts in relation to how they account for players.

The Basics

When a club signs a player, they will often pay compensation to the previous club for his registration certificate lodged at the football authorities, this is what is commonly called a transfer fee and is either negotiated between the two clubs or embedded in the player’s contract.

The buying club then spreads the cost of the transfer fee over the period of the contract signed by the player, so when Harry Maguire signed for Manchester United in summer 2019 for £80 million on a six year deal this works out as an annual amortisation cost of £13.3 million (£80m/6).

The total amortisation fees for the whole squad are treated as an expense in the accounts, and importantly, ARE included in Financial Fair Play/Profitability & Sustainability (P&S) calculations.

Amortisation costs for many clubs in higher divisions are usually the second biggest expense after that of player wages, as shown by the figures below for Everton.

The creatives

Under P&S rules clubs are assessed over a three year period, so sometimes it may be beneficial for them to accelerate or decelerate costs in a particular year, so ensure they stay within the limits during a particular three year assessment period.

Here are possible methods that could be used, all of which have been approved by the clubs’ respective auditors.

  1. Player impairment

All fans have seen players who they quickly write off as rubbish and a waste of money. This applies in the accounts too.

In 2015/16 Aston Villa were relegated from the Premier League, which allows a P&S loss of £105 million over three years, which then tapers down to £39 million over three years in the EFL Championship.

It is therefore in Villa’s interests to put as many costs into their 2015/16 accounts to be absorbed by their Premier League P&S limit.

Villa achieved this by charging an extra £79.6 million as a cost in the expense for impairment of the stadium and players (called ‘intangible assets’ in the accounts).

This works as follows. If you sign a player for £30 million on a five year contract the amortisation cost is £6m a year, a tough cost to have to deal with in the Championship. However, if the club was relegated at the end of the first season there is nothing to stop it from assessing the player’s value and conclude that he is worth, say, £10 million.

This would mean that his book value at the end of year one would fall from £24 million (£30m less one year’s amortisation of £6m) to £10m, which would result in a £14 million impairment charge.

However in subsequent years the amortisation charge would be just £2.5 million a year (£10m book value spread over the remaining four years of the contract), which is useful for P&S purposes in the Championship.

When Villa did this the £35 million impairment charge in 2016 would (if remaining contract lengths were on average 3 years) have reduced costs by nearly £12 million a year in the Championship.

Sometimes the reason for an impairment is clear and the decrease in value is understandable (due to long term injury, the fee initially paid was too high or the player is Mario Balotelli). Impairment does however give clubs licence to accelerate player costs into an earlier year.

  1. Contract extensions

Amortisation is the registration fee spread over the contract period, so if you extend the contract you reduce the annual cost.

Example: Sign a player for £20m on 1 January 2019 on a four year contract. At the end of 2019 give him a two year contract extension.

Amortisation charge in 2019 = £5m (£20m/4)

Amortisation charge 2020 onwards £3m ((20-5m)/(3+2))

This reduces FFP losses by £2m a year.

Therefore by extending a contract a club can reduce costs in a single year.

  1. Player sale profits

These are calculated by comparing the transfer fee receivable to the book value of the player. Even when a player is sold at what fans may think is a loss for accounting purposes it can work out at a profit.

Example: A player is signed for £40 million on a five year contract on 1 January 2018. He’s not been a success so is sold for £26 million on 1 January 2020. At that date his accounting book value is £24 million (£40m – 2 years amortisation at £8m a year) so book a profit of £2m on the deal.

It’s always important to check the sale date though, as these can be confusing. In the Derby County accounts for the year ended 30 June 2017 the club included the profit on the sale of Tom Ince to Huddersfield Town, which contributed towards FFP for that year. That’s all well and good but the sale of Ince did not take place until July 2017, which is in the 2017/18 accounts in theory.

By having a player sale just before or after the year end a club can increase or decrease profits in the year that suits it best.

  1. Residual Values

The issue that appears to be irking the EFL most of all is Derby’s use of residual values for players. All other Premier League and Championship clubs amortise player contracts on a straight line basis to a zero value at the end of the contract. This is because players can leave on a Bosman deal at the contract end so the ‘selling’ club received no fee.

Derby changed their accounting policy in 2017 for player registration fees to include the ‘ consideration of active market residual values’. Prior to that Derby ignored residual values similar to other clubs.

This might seem an insignificant comment, but this allows a club to reduce amortisation fees (and therefore costs for FFP). A player signed on a £30m four year deal costs £7.5 million annually in amortisation.

If the club gives him (say) a £12 million residual value at the end of the contract (which ignores he can leave on a Bosman) then the amortisation cost falls to ((£30-12m)/4) = £4.5 million a year.

A look at Derby’s accounts shows that for 2017/18 the club had transfer fees and registration intangible assets that were £52.5m at the start of the year and £62.2m at the end. This gives an average of £57.3m. The amortisation fee for the year was £6.6 million. This means that Derby were effectively spreading transfer fees over 8.7 years, which seems very long for contract length, and is far longer than the average for the division of about 3.7 years.

Derby’s defence is that the EFL had already signed off on the issue and that they should have been aware of it. I can confirm the latter having written to the EFL in June 2018 on the very subject which generated this response from…supporter services.

Given that the EFL have been aware of the issue since June 2018, it does seem odd that the charges have been made at Derby in January 2020.

Podcast 16 January

In this show Kevin and Kieran look at how Chelsea won the Europa League, finished in the top four domestically but still needed to borrow £247 million from Roman Abramovich as they racked up huge losses.

Plus a look at what happens when UEFA ride into town, the situation at Southend where wages have gone unpaid, why Spanish and Italian games are being played in Riyadh and much more.

Podcast 13th January

It’s another one of our listener’s questions (or should that be reader’s wives) shows in which we look at the demise of Chesterfield since relegation to the National League, whether another Leeds United style implosion could arise if a club leaves the Premier League and exactly what did (and did not) the auditors do at the FAI. https://podcasts.apple.com/gb/podcast/spireites-the-next-leeds-united-and-the-fai/id1482886394?i=1000462328392

Podcast 9 January 2020

After UEFA reveals how much cash each club received for the group stages of this season’s Champions League, Kevin and Kieran find out who came out on top. Plus, with talk again of a European Super League in the future, they ask whether these figures effectively mean we have one already. They also look at the implications of Macclesfield’s latest points deduction and the mysterious case of Craig Dawson and the £2m fee.

https://share.transistor.fm/s/d980e874

Podcast January 2nd

In this episode we look at why Stoke City’s, owned by £65 billion a year in wagers Bet365 want FFP to be changed. We look at the price of opening your mouth, as Mesut Ozil upsets the Chinese state broadcaster who pay a lot of money for Premier League TV rights, Sunderland director Charlie Methven calls the club’s fans uneducated and a fan gets a ban from his own club for complaining about Manchester City’s owner’s human rights record.

https://share.transistor.fm/s/09e9fc7f

Christmas Day Podcast

Kevin and Kieran answer a load listeners’ questions, including where the fine paid by Leeds over ‘spygate’ ended up, whether Premier League clubs’ revenue is anywhere near its peak, and why the away club’s ticket money s often paid to the home club five days after the match. They also hand out the Price of Football podcast’s end-of-season awards and Kevin gives his tip for perfect Brussels sprouts on the big day.

https://podcasts.apple.com/uz/podcast/price-of-football/id1482886394

Rangers and Celtic: Never Let Me Down

Reach out and touch faith

Glasgow’s big two teams have  good starts to both domestic and Europa Cup campaigns so far this season and both have just announced their financial results for 2018/19.

Everyone know that the rivalry between the clubs and especially their fans is intense,  but do the accounts give the likes of @BearNecessities1872 and @PopeAndGlory on Twitter more point scoring opportunities against each other?

Revenue

Revenue for clubs is generated from three sources, matchday, broadcasting and commercial.

Relative to the rest of Scottish football, where many clubs are so small, they are not legally obliged to show income and expenses in their accounts, Celtic and Rangers dominate as would be expected.

All clubs have committed fanbases but this is especially reflected in the big two in ticket sales with Celtic averaging nearly 58,000 every match at home last season and Rangers well over 49,000.

Revenue from matchday is calculated as number of tickets sold per match x average ticket price x number of home matches played.

Due to both clubs nearly selling out every match and fans being resistant to significant ticket price increases matchday revenue growth is only achieved via clubs increasing the number of matches played.

An impressive increase in Rangers matchday income was due to the club reaching the group stage of the Europa League whereas Celtic reached the last 32 of that competition.

Note that the two Glasgow clubs are significantly ahead of the Hearts, who have the third highest matchday income in the Scottish Premiership with just over £5 million.

Due to the level of support from fans that both Glasgow clubs would only be behind the ‘Big Six’ clubs in terms of Premier League matchday income.

Love it or loath it broadcast income is a big discriminator in terms of club earnings.

European cup participation makes a big difference to overall earnings.

Nevertheless, Scottish clubs both benefit and suffer from the complex distribution methods used to distribute money from UEFA.

Not many realise that Because BT pay the largest sum for Champions and Europa League rights in Europe, Scottish and English clubs benefit from this being distributed via what is called the market pool.

Only Scottish clubs relatively poor performance in UEFA competitions in recent years resulted in a low UEFA coefficient (which measures historical success by national teams in the Champions and Europa League) and therefore their share of this pot of money is far lower than that of England, Germany, Italy, Spain etc.

Not that fans will like it but paradoxically Rangers and Celtic both stand to benefit indirectly from all Scottish clubs progressing in Europe as this will increase their UEFA ranking, where being in the top 15 nations could have significant implications in future competitions.

Seeing Celtic’s broadcast income higher than that of Rangers needs further investigation and this was because Celtic made more progress in the domestic cups and in Europe.

Due to another one of UEFA’s pots of cash, which is linked to overall performance over the last decade in Europe, Celtic earned more broadcast revenue.

European participation for Rangers wasn’t the case when they were in the lower leagues of Scottish football for some of the last decade.

Broadcasting income in England is the major driver for the gap between Celtic and Rangers and Premier League clubs, but what is perhaps more alarming for their fans is that they are also behind many teams in the English Championship who are earning parachute payments.

Universally impressive for both clubs is the level of commercial income generated from sponsorship, advertising, kit manufacturing, merchandise and hospitality.

The impact of Steven Gerrard was a driver of Rangers increase in this income stream last season as sponsors are willing to pay more to be associated with such a high-profile individual

Sales from retail activities increased substantially at Ibrox last season but are still not maximising their potential due to an ongoing legal dispute with other parties including Mike Ashley, the Newcastle owner, which has restricted sales and had some fans boycotting products.

In the case of Celtic the club has had the benefit of European competition access including some Champions League participation in recent years to help them improve commercial income.

Numbers from the three revenue sources added together resulted in Celtic generating revenue of over a quarter of a billion pounds more than Rangers over the last six years but both clubs income still dwarfs that of Aberdeen, the club with the next largest income.

Gaps of that size are difficult to eliminate but last year was the narrowest for some time, yet Celtic still had a thirty-million-pound advantage over Rangers and that’s before considering player sales, although a Premiership win and participation in the group stages in the Champions League could change things for Rangers..

Looking at the profit and loss account in more detail showed that Celtic also had ‘other income’ of £8.8 million as compensation from Leicester City for headhunting Brendan Rodgers and his backroom team part way through the season.

Costs

Every club’s main costs are in respect of players via wages and transfer fee amortisation.

In the case of the two big Glasgow clubs their wage bills are far in excess of other Scottish clubs and Celtic’s higher income in turn allows them to pay higher wages than Rangers.


Steven Gerrard’s wages plus those of the players he signed resulted in Rangers wage bill increasing by over a third, whereas a lack of Champions League participation meant that Celtic’s wages falling slightly.

Player transfer fee amortisation is the amount paid spread over the length of the contract.

Estimating transfer fees is difficult as so many transfer fees are ‘undisclosed, but if Rangers signed Conor Goldson from Premier League Brighton for about £1.5 million on a four-year deal this would result in an amortisation cost of £375,000 per annum.

Rangers spending on the squad has increased noticeably since they returned to the top division and this is shown by the rise in their amortisation charge.

Success on the field for Celtic has resulted in a far bigger amortisation charge in recent years partly due to winning eight Premiership titles in a row.

Obviously, the income that such success brings domestically and in European competition has then been invested in player signings.

Notes to the accounts reveal that In addition to amortisation, both Rangers and Celtic reported ‘impairment’ costs of £1.6 million and £2 million respectively in relation to players whom they had signed whose poor performances meant their values were reduced.

A lot of fans will point their fingers at the likely individuals who suffered this ignominy but the clubs themselves are tight lipped on the matter.

Looking at Rangers ‘other costs’ these increased by 70% to over £21 million in 2018/19.

Just part of this is due to extra stewarding and policing in respect of Europa League matches at Ibrox but also an alarming £3.6 million increase in legal costs as Rangers disputes with Mike Ashley’s Sports Direct rumbled on throughout the year.

Player Trading

Every club sells as well as buys players and In recent years Celtic have made impressive profits selling one or two high profile players each year.

Selling Moussa Dembele to Lyon for about £20 million generated a big profit as the player cost the club a fraction of that sum from Fulham.

Upping profits for next season for Celtic will be the sale of Kieran Tierney which took place after the accounting year ended and that will contribute £25 million.

Selling player by Rangers has not been such a contribution to the bottom line, although the prolific Alfredo Morelos is likely to command a high price should he leave the club in the next year or so.

Buying into Steven Gerrard’s vision for the club last season meant Rangers outspent Celtic for the first time in many years in terms of player signings.

Profits and Losses

Yearly profits are total income less costs and whilst Celtic’s fell significantly in 2018/19 they were still substantially ahead of Rangers.

Desperate times can arise If a club is losing money, as the only way to survive is to sell off assets or have funding from lenders or shareholders.

Even though Rangers didn’t sell any players for large fees they generated £2 million from share issues and £8 million from loans in 2018/19 to plug the gap from day to day losses, whereas Celtic needed no such funding.

Summary

Predictably given their respective finances Celtic and Rangers finished in the top two positions in the Premiership in 2018/19.

Exploiting the financial gap between these two clubs and the rest of the division, means that it will be difficult for other Premiership clubs to make a challenge for the top positions in the league, especially with their relative success to date in the Europa League in 2019/20.

Celtic have a noticeable advantage over Rangers in terms of income generation and profitability, partly due to their ability to buy low and sell high in terms of player trading, and this has allowed them to pay higher wages, which is usually, but not always, reflected on the pitch.

Having this advantage gives Celtic a greater, but not guaranteed, chance of success in terms of trophies.

Even so, Rangers is potentially going to continue to lose money unless a more successful player trading policy and a resolution to ongoing legal disputes is achieved.

Most concerning is that in the accounts are the comments from Rangers auditors highlighting the club’s ability to trade as a going concern.

Only investment by Dave King and other investor plugged the gaps in Rangers finances last season and £16.6 million of shareholder loans were effectively written off by being converted into shares, diluting other shareholdings in the process, and King has been subject to criticism by the Takeover Panel for some of his actions.

Due to Rangers finances being precarious if investors are unable or unwilling to cover the losses indefinitely then Rangers would face substantial cost cutting or what Sir Alex Ferguson would call ‘squeaky bum time’.

Every Rangers fan will be asking themselves, given the clubs recent history, whether or not they are willing to take this risk if it stops Celtic winning ten titles in a row?

Bristol City 2018/19: Empty Skies

Call us free by a promise torn, you said I’ll meet you there

Introduction:

Life in the Championship is tough, and Bristol City’s latest financial results are testament to that as playoff hopes were dashed and the club lost a lot of money on a day to day basis.

Every cloud has a silver lining and City’s impressive player recruitment and talent spotting allowed the club to reverse these losses due to player sales that generated £38 million profits.

Even so, the club needed the benevolence of owner Stephen Lansdown to keep its head above water as he continued to pump money into City.

Key figures for year to 31 May 2019: Bristol City Holdings Ltd

Income £30.3 million (up 20%).

Wages £30.6 million (up 12%) .

Losses before player sales £26.3 million (up 9%)

Player sale profits £38.2 million (2018 £0.3 million)

Player signings £10.2 million (2018 £12 million)

Player sales £39.7 million (2018 £1.8 million)

Steve Lansdown investment £137 million (up £10 million).

Justifying such a huge investment is difficult but City are fortunately owned by Pula Sports Limited, a company based in Guernsey.

Owner of Pula Sports is in turn Steve Lansdown, half of Hargreaves Lansdown, the £8 billion plus valued financial services company.

Income:

How most clubs generate money does vary but for most is split between matchday, broadcasting and commercial sources.

Nowadays some clubs in the Championship also have the benefit of parachute payments following relegation from the Premier League (EPL).

Stoke, Swansea and West Bromwich Albion will all have generated more money from parachute payments in 2018/19 (about £41 million) than City will have made from all their regular income sources.

One thing that is always good about City is that they are always one of the earliest clubs to publish their finances each season, but this does mean that many comparative figures for other clubs are from 2017/18.

Nudging their way into the top ten revenue earners in the Championship is an achievement given that City start so far behind the recipients of parachute payments.

Strip out the parachute payments (and their quasi-equivalent for other clubs in the Championship from the Premier League called solidarity payments) and City rise to 4th in the income table, which suggests that the club’s investment in Ashton Gate recently is paying off.

Football fans pay money through the turnstiles via season ticket purchases, which tend to be relatively constant, and matchday tickets, which are more volatile as clubs dependent upon promotion and cup runs.

Ashton Gate’s attendances were very similar to those of the previous season, at just over 20,000, but City’s impressive League Cup run in 2017/18 was not replicated, reducing income from one off matches.

Very few clubs in the Championship have matchday income increasing every year as clubs’ fortunes vary, and City had a 10% decrease in 2018/19.

Overall City’s matchday income was mid table for the Championship and this is intuitively where you would expect to see them in a division that does generate from some large attendances at other clubs.

Under Steve Lansdown’s ownership recently Ashton Gate has been transformed and this is reflected in the growth in commercial income.

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Relative to other income sources commercial income is now the biggest earner for City, generating over half of the club’s revenues compared to a quarter in 2013.

Infrastructure spending by City at Ashton Gate and the consequent surge in banqueting, conference hosting and other similar activities has resulted in the club having the second largest commercial income stream in the Championship.

The split of broadcasting income in the Championship is very much a two-tier scenario, with parachute payments distorting numbers significantly.

Every club in the Championship receives broadcast income from both the Premier League and the EFL.

Distribution of broadcast money to clubs such as City comes in the form of solidarity payments (which is an agreed percentage of the Premier League fixed broadcasting pay-outs) which were £4.5 million and their share of the EFL TV deal at £2.9 million.

Income overall therefore for City was a record £30.3 million, five times that of 2013/14, but was it enough to allow the club to make a profit?

Costs:

Success in football is down to players, and player costs are the most significant for a club.

Nowadays players and their agents are fully aware of their value and this means that clubs must pay substantial wages to attract and keep talent.

Every club has two forms of player costs, wages and transfer fee amortisation.

Year on year wages in the Championship have risen in recent years and between 2014 and 2018 they increased by over £284 million, more than the change in revenue during the same period.

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For City the wage change has been equally alarming as the wages increased by over 12% and the average is now £13,700 a week as the club tried to keep up with the Joneses in the Championship salary league table.

Investing to this extent has resulted in City spending £96 million in wages since returning to the Championship in 2015/16, during which total income has been £91 million leaving nothing to pay any of the other running costs, unless these are bankrolled by Steve Lansdown.

Life in the Championship is hard as clubs paid out £107 in wages for every £100 of income, but City also had similar issues when they were in League One a few years ago.

Most clubs in the Championship are paying wages that are unsustainable in the long run but the relaxation of FFP rules (or Profitability and Sustainability, which is ironic as clubs are neither profitable nor sustainable under the rules) a few years ago has resulted in wage growth being significant.

Investment in players also comes via transfer fee amortisation, which is where the sum paid for the player’s registration is spread over the length of the contract signed.

Signing the excellent Adam Webster from Ipswich at the start of 2018/19 for £3 million on a four-year contract therefore resulted in an amortisation charge of £750,000 (£3m/4) in the profit and loss account for 2018/19.

The total amortisation charge for the last season was £7.9 million, an increase of 16% over the previous season and six times the amount of when City were in League One.

Having been only the second club in the Championship to publish accounts for 2018/19 means that a perfect comparison isn’t possible with other clubs, but City are about mid table in terms of their amortisation cost.

Every business has other operating costs too and City’s increased by over 20% to £15.2 million, perhaps due to the increased expense of running the expanded conferencing and hospitality activities.

Profits (or perhaps more appropriately Losses?)

Losing money in the Championship is pretty much a given and City’s underlying operating losses from day to day activities were £26.3 million last season, or £506,000 a week.

It therefore means that total losses since 2013 exceed £100 million and means either player sale profits or owner investment are required to reduce these losses.

The sales of Reid, Bryan, Flint and Kelly during the year to 31 May 2019, as well as a promotion clause kicking in from Villa in respect of the sale of Kodija resulted in City having player sale profits of £38.2 million in 2018/19.

This level of profit is very high by both City’s own standards and those of the Championship but is also very volatile and can’t be relied upon to take place every season.

Losses following player sales have therefore been reduced to ‘just’ £69 million since, but Steve Lansdown still has effectively had to find £200,000 each and every week for six years.

EFL FFP rules restricts losses to £39 million over three seasons, but the player profit sales from last season mean that City’s losses are an estimated £7 million so the club will have plenty of wiggle room at present.

Manipulating club finances to satisfy FFP is a contentious issue at present with some clubs having unusual transactions with companies controlled by the club owner to boost income, but there is no evidence of such behaviour at City.

Every club can exclude academy, infrastructure, women’s and community scheme costs from FFP calculations, and this has created additional loopholes exploited by those clubs whose owners are used to getting their way.

Player trading:

Reliable figures for individual transfers aren’t available as these days (Transfermarkt numbers are usually just guesses) as most transactions are for ‘undisclosed’ sums but overall City spent just over £10 million on players in 2018/19.

Mid table in the spending charts is where £10 million gets you in the Championship although most of the figures in the table are from 2017/18 and we expect the total of £310 million that season to fall as clubs have reduced spending to comply with FFP.

As already mentioned, City had substantial player sales in 2018/19 which brought in a total of £40 million but many of the sales were on instalment terms and only £18 million of this was received in the form of cash.

In the footnotes to the accounts it shows that City earned a net £3 million after the year end from player trading, which presumably includes the sale of Webster to Brighton for £15-20 million so must include a lot of purchases too.

Funding the club

Director and owner Steve Lansdown’s total investment increased further in 2018/19 as he invested a further £10 million in the club via holding company Pula Sports and a share issue. Pula also guarantee a £50 million bank loan for the club. Lansdown’s total investment is therefore about £130 million in City.

Realistically, Lansdown will have to subsidise the club by a minimum of £10-20 million a year for the foreseeable future, unless promotion to the Premier League is achieved or there are substantial player sales.

Conclusion

Bristol City are a classic example of life in the Championship finances, loss making, reliant on a benevolent owner and occasional player sales and unable to keep wages under control.

If promotion is achieved fans will take the view that all of this is worth it, but until then it’s a hard slog of 46 league matches on a Saturday, Tuesday, Saturday, Tuesday cycle and thanking their lucky stars they have an owner prepared to cover the weekly losses.

Bury: Another brick in the wall

Overview

Guinness Book of Records announces new entrant in ‘World’s Smallest Fan Club’ category

The company has taken advantage of legislation for small businesses to avoid publishing full financial statements. This means that there is no profit and loss account or income/wage details.

No accounts have been published for the year ended 31 May 2018, in breach of company law, making the directors guilty of a criminal offence.

Losses accelerated for the company from 2013 onwards, following the acquisition of the club by Stewart Day.

In the two years when the club did publish fuller sets of accounts, wages exceeded income.

Income details

Bury’s income increased in 2015/6 and 2016/7 when the club was in League One. This is partially due to increased broadcasting revenues which are 50% higher for clubs in League One compared to League Two.

Compared to other League One teams Bury generated low levels of income. Detailed breakdown of income is not given, but clubs in the division earn about £1.4 million a year from broadcasting and the balance is from matchday and commercial sources.

Wages

Bury’s wage bill has only been published twice, but there was a 29% increase in 2015/16 following promotion. In 2014/15 Bury paid £129 in wages for every £100 of income in League Two in 2014/15 and were still paying £100 in wages the following season despite the boost to income following promotion.

Compared to other clubs in the division Bury’s wage bill was moderate. There is a commonly held view that Stewart Day was trying to ‘buy’ promotion via paying unsustainable wages, and this some merit on a proportion of income basis but not on in terms of the total wage bill.

Profits/(Losses)

Bury have been losing about £50,000 a week in the last few years, although figures for the period since 2016/17 are not available.

The deterioration in Bury’s profitability started when Stewart Day acquired the club, with losses exceeding £50,000 a week in the last three years.

Bury had the fourth highest losses in League One in 2016/17.

Stewart Day/Mederco

Investors can either lend money to a business or buy shares. In the case of Stewart Day and Mederco there has been a combination of both. Day has historically said that loans would be converted into shares where necessary and this appears to have been the case. There were of course other loans from lenders with a less benevolent attitude to the club.

Bury’s level of borrowing was modest by League One standards, however the key issue in respect of debt is the ability of the borrower to repay sums due to lenders.

Conclusion

Bury’s financial performance and position deteriorated under Stewart Day. His ambition to make Bury a competitive team at the top of League One with the aim of promotion was based on having the ability to underwrite the losses. Once Day’s other businesses, which were the means by which the losses were covered, went into administration then the excess spending meant the club was no longer viable.

As Day needed to sell the club to relinquish responsibilities for the £50,000 a week losses, he didn’t/couldn’t take too much notice of the background of Steve Dale, to whom he sold the club for £1.

Dale displays characteristics of a sociopathic narcissist, similar traits to those of Ken Anderson at Bolton. Combine those character traits with a history of asset stripping and it was sadly no surprise that Bury’s financial problems multiplied under his ownership to date.