Blackburn Rovers: Look what you could have won

Key Figures

Rovers became the first Premier League winners to be relegated to the third tier in May 2017, and their annual accounts aren’t going to put a smile on fans’ faces either.

Income £14.9 million (down 32%)

Wages £22.0 million (down 13%)

Loss before player sales £13.7 million (down 17%)

Player purchases £1.3 million

Player sales £11.1 million

Borrowings £112.8 million

The club was acquired by Venkateshwara Hatcheries Pvt Ltd in October 2010, so this analysis concentrates on the club’s finances under their ownership.

Income

2016/17 was the first season Blackburn did not have the benefit of parachute payments.

Not all clubs have announced their results for 2016/17 yet, but most clubs are showing higher income than in the previous season. The average income of the 17 clubs that have reported to date (which excludes some big hitters such as Newcastle and Dirty Leeds) is £31 million.

In 2015/16 the average for a Championship club was £23 million. The main reason for the increase 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.

Like all clubs Rovers earn their income from three sources, matchday, broadcasting and commercial/sponsorship.

The table shows how much Rovers benefitted from being in the Premier League in the first couple of seasons under the Venky’s ownership, but also how much the club was reliant on parachute payments for the next four seasons.

Matchday income in 2016/17 was down 6%, as crowds fell by an average of 1,500 to 12,600 as the club slid to relegation.

Rovers are in the bottom quartiles in terms of matchday income and combined with no parachute payments, in the era of FFP this puts them at a disadvantage when competing for players.

Broadcast income was down 50% to £6.7 million. This was due to the Rovers’ four-year receipt of parachute payments finishing the previous season, combined with the club rarely appearing on Sky at Ewood, which is worth £100,000 a match. As a consequence, the club has the second lowest broadcast income total in the division.

The impact of parachute payments for the top six clubs in the chart is very evident. Norwich earned £7.50 from broadcasting for every £1 earned by Rovers.

Things will be far worse in League One, as solidarity payments are only worth about £650,000 in this division.

Commercial income fell only by 3%, which, given Rovers relative lack of appeal to commercial partners, is probably a reasonable effort. What is unclear is how much of this is from the club’s holding company Venky’s London Limited.

The accounts do contain a mysterious note tucked away on page 29 of the accounts, by which time most right-minded people will have lost all interest.

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The note shows that Rovers received £3.7 million from the parent company, if this is included in commercial income then there’s not a lot of money being generated from other commercial relationships.

Overall broadcasting income is still the biggest contributor to Rovers’ coffers, although it is not contributing three quarters of the club’s income as when the club was in the Premier League.

Costs

The main costs at a football club are player related, wages and transfer fee amortisation.

Rovers wages have more than halved since they were in the last in the Premier League, but the rate of decrease is not as fast as the club’s fall in income.

Wages fell by 13% and are quite low by Championship standards, where the average for last season was about £27.1 million. Clubs such as Sheffield Wednesday, Brighton and Forest, all of whom also do not receive parachute payments, paid out significantly higher sums for wages last season.

Whilst Rovers’ wage bill is towards the bottom of the scale in the Championship, they are still paying out a lot of money compared to the club’s income.

The above graph shows how much the club has been paying out in wages compared to income. In 2016/17 Rovers paid out £147 in wages for every £100 of income. This means that the owners, the Venkys, whilst as popular in Lancashire as a fart in a spacesuit, were not only subsidising the wages to players, but also paying for all the other costs incurred by the club too, such as ground maintenance, electricity for the floodlights and insurance etc.

Since acquiring the club Rovers have generated £228 million of income but spent £248 million in wages under the Venky’s.

The Championship is a car crash of a division, and in 2015/6 the wages/income ratio was 101% for the division as a whole.

It will give Rovers fans little solace in the year they were relegated, but at present they stand at the top of the wages control % table for 2016/17.

Brighton, who are second in the table, had £9 million of promotion bonuses in their wage total which distorted the figure, and also had the enjoyment of being promoted last season.

Amortisation is how clubs deal with transfer fees in the profit and loss account. When a player signs for a club the transfer fee is spread over the life of the contract. Therefore, when Rovers signed Jordan Rhodes for £8 million from Huddersfield on a five year contract the amortisation charge of £1.6 million a year for five years (£8m/5). 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).

Wolves total amortisation charge was £0.7 million, a decrease of 2/3 on the previous season and less than a tenth of the initial years under the Venky’s.

Whilst some will see this as prudent cost cutting, it also suggests that the club have been signing players at the bargain bin level, which means that the chances of selling them at a profit is also diminished.

Losses

Losses are income less costs. The bad news for Rovers is that the club lost a lot of money last season from day to day trading. The good news is that they sold Grant Hanley (to promoted Newcastle) and Shane Duffy (to promoted Brighton) at a combined profit of £10.4 million to offset the day to day losses, which will help the club in terms of FFP compliance.

Operating losses are income less the running costs of the club (wages, maintenance, insurance, amortisation etc. and they are before deducting interest costs. In 2016/17 this worked out as £13.7 million, or £263,000 a week.

In the seven seasons under the Venky’s, two of which were in the Premier League, and four of which the club were in receipt of parachute payments, Rovers have lost £136 million.

The club have managed to sell players on a regular basis at a profit of £38 million during this period, but it still leaves a substantial loss.

Under FFP rules, Championship clubs can make a maximum FFP loss of £39 million over three years in the Championship. Rovers have a pre-tax loss of £25.9 million over the three year period, mainly due to gains on player sales of £30 million, which prevented them breaching FFP.

Fortunately, some costs, such as infrastructure, academy and community schemes, are excluded from the FFP calculations. Rovers have a category one academy, which costs about £5 million a year to run, so this, combined with other allowable costs, should ensure the club has some leeway in terms of meeting the FFP target.

In League One the FFP rules are different, with players wages being not allowed to exceed 60% of income, but the rules are slightly relaxed for relegated clubs.

Player trading

The accountants treat player trading in a weird way in the accounts. 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

Under the Venky’s Rovers have bought players for £47 million and generated sales of £57 million. Whilst this has been good for FFP purposes, the chances of the production line of players that can be sold for substantial fees continuing is remote, as evidenced by a footnote to the financials for 2016/17.

The note shows that Rovers had no transfer income during the 2017/18 summer window.

Debt

When the Venky’s took over Rovers, the club had debts of £21 million. Since then the debts have increased nearly every year, and now stand at just under £113 million, and would have been far higher had it not been for player sales in the last two seasons.

Summary

Under the Venky’s, Rovers have both been relegated and squandered their parachute payments. From an independent observer’s perspective the decision making of the owners seems baffling. They seem happy to underwrite losses running into hundreds of thousands of pounds per week for no benefit, financial or in terms of brand awareness of their main business in Indian poultry.

At least Rovers time in League One looks like being a brief one, as losses would potentially increase given the lack of TV money their compared to the Championship. If the club is promoted, the financial strategy of the owners is best described as ‘unpredictable’. Will they do a Fosun at Wolves and go for broke to be promoted, or try to get Rovers on an even keel financially?

Data Set

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Wolves 2016/17: Far Far Away

Introduction

Wolves have been sensational in the EFL Championship this season, and this has prompted critics to question the role of superagent Jorge Mendes, and the owners Fosun International, who acquired the club in 2016.

We’ve taken a look at how the club has fared financially in the first year of Fosun’s ownership, and its position in terms of Financial Fair Play (FFP).

The club has just announced losses of over £23 million for 2016/17, but that doesn’t seem to have stopped its spending, so are they breaking the rules?

Income

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Not all clubs have announced their results for 2016/17 yet, but most clubs are showing higher income than in the previous season. The average income of the 16 clubs that have reported to date (which excludes some big hitters such as Newcastle and Leeds) is £32 million.

In 2015/16 the average for a Championship club was £23 million. The main reason for the increase is due to a combination of higher parachute payments, along with a new TV deal in the Premier League, which drips down to the Championship in what are called ‘Solidarity Payments.

Like all clubs Wolves earn their income from three sources, matchday, broadcasting and commercial/sponsorship.

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The table shows how much Wolves benefitted from being in the Premier League in 2011/12 but also how much the club was reliant on parachute payments for the next four seasons. Those parachute payments expiring in 2015/16 are partially responsible for the significant losses recently released.

Matchday income in 2016/17 was up 22%, as fans bought into the investment by Fosun in the playing squad. Finishing 15th was therefore meant that the club failed to meet expectations of all concerned on the pitch.

Attendances averaged just over 21,500, up about 1,300 on the previous season.

Broadcast income was down 42%. This was due to the Wolves four-year receipt of parachute payments finishing the previous season.

The situation would have been worse but luckily the club was fortunate that the Premier League signed a new TV deal for 2017/18, and a fixed percentage of this is allocated to the EFL in what are called solidarity payments. This was worth about an extra £1 million to all clubs in the Championship, peanuts by Premier League standards, but still very useful to those further down the food chain.

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Wolves’ commercial income was the biggest contributor, which is unusual for a football club. Commercial income was up 15%, how much, if any, of this is due to deals signed with Fosun related companies is unknown.

Some clubs in the Championship generate up to 85% of their income from broadcasting, mainly due to the receipt of parachute payments.

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Costs

The main costs at a football club are player related, wages and transfer fee amortisation.

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Wolves wages almost halved from 2012 to 2014 as the club fell from the Premier League to the League One. Whilst this was tough to take for fans, it did allow the club to jettison some deadwood during that period, such as Jamie O’Hara, who was allegedly being paid a seven figure sum a year whilst playing for the club’s reserves in League One, a situation that troubled him so much he was forced to have affairs with random women whilst his former Miss England Danielle Lloyd was taking the bins out at home.

For the first two seasons back in the Championship Wolves showed restraint in terms of wage spending. The arrival of Fosun and Mendes resulted in wages increasing by 55% last season.

Whilst there are many sniping at Wolves for this increased wage expenditure, the club is only marginally ahead of the average for the division of

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Wages fell by a quarter but are still reasonably high by Championship standards, where the average for last season was about £27.3 million. Clubs such as Sheffield Wednesday, Brighton and Forest, all of whom also do not receive parachute payments, paid out higher sums for wages last season.

Amortisation is how clubs deal with transfer fees in the profit and loss account. When a player signs for a club the transfer fee is spread over the life of the contract. Therefore, when Wolves signed Ivan Cavaleiro for £7 million from Monaco at the start of the season, but as he signed a five year contract the amortisation charge of £1.4 million a year for five years (£7m/5).

Wolves total amortisation charge was £7.6 million, 160% higher than the previous season, and higher than any other club not in receipt of parachute payments. It was still only a third of the amortisation of Villa though, who spend over £80 million on new players in 2016/17.

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Putting these two costs together highlights how much of a transformation arose in 2016/17. The previous season the club’s combined wages and amortisation cost represented £78 for every £100 of income, in 2016/17 this nearly doubled to £151 for every £100 of income.

With the investment in new players in 2017/18, this ratio is likely to increase further in 2017/18. It does suggest that Wolves are going for broke this season, which may mean that they would have to cut back substantially if promotion is not achieved, although their present lead over the team in third place is looking substantial.

Losses

Losses are income less costs. The bad news for Wolves is that the club lost a lot of money last. The good news is that profits were made in previous years, which will help the club in terms of FFP compliance.

Operating losses are the trading losses of a club, and they exclude interest costs. In 2016/17 this worked out as £22.6 million, which works out as £430,000 a week.

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It is these losses, and the subsequent purchasing of players for whom Mendes is the agent in 2017/18, that has caused so much grumbling from other chairmen in the Championship.

Such grumbles weren’t heard however when Wolves made far larger losses in 2012/13, although this could be that they finished bottom of the Championship that season and stank out the division.

Under FFP rules, Wolves can make a maximum FFP loss of £39 million over three years in the Championship. Wolves have an overall loss of £12.6 million over the three year period, so appear to be significantly within the limit. However, if losses are similar this season to 2017 then the three year total will rise to about £38 million. Add in interest costs on borrowings and the losses are likely to exceed £39 million.

Fortunately, some costs, such as infrastructure, academy and community schemes, are excluded from the FFP calculations. Wolves have a category one academy, which costs about £5 million a year to run, so this, combined with other allowable costs, should ensure the club has some leeway in terms of meeting the FFP target.

Player trading

The accountants treat player trading in a weird way in the accounts. 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

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After three years of effective restraint, the arrival of new owners Fosun resulted in Wolves spending like drunk lottery winners in 2016/17. The club spent over £32 million on new players in 2016/17. In addition to this, hidden away in the footnotes to the accounts is revealed that the club spent a further £35 million in the present season.

This is likely to substantially increase the wage and amortisation charge, but Wolves will be able to offset against these costs the £7.3 million of profits on player sales, so should be within FFP limits.

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Debt

Fosun lent Wolves £21 million in 2016/17, but unlike the owners at West Ham, who have charged over £14 million in interest charges since acquiring the club, the loans are presently interest free.

It is likely that Fosun have lent further sums during the present season.

In addition to loans from the owners, whilst Wolves have spent a fortune on new players, most of this has been on credit.

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Wolves owed other clubs £23 million for player transfers at the end of the 2017 season, this is likely to be substantially higher at the end of the present season.

Summary

Wolves have been transformed financially following their takeover by Fosun. However, having cash to spend is one thing, and spending it well is another.

Fosun are worth £13 billion, so there is plenty of spare money to spend should they reach the Premier League. What is slightly concerning is the set up of hte group, with Wolves now being owned by a Fosun subsidiary based in the British Virgin Isles.

Last season, whilst there were big money signings, they didn’t have a positive impact on the league position. It looks as is that problem has been remedied for 2017/18.

The role of Jorge Mendes is intriguing, although one would wonder why someone who already represents Cristiano Ronaldo and Jose Mourinho needs to spent a lot of time in relation to having a significant involvement with a Championship club, as the snipers claim.

FFP will be an issue, but only if the club fails to be promoted to the Premier League this season. The club is likely to be within the limits for the three seasons ended 2017/18 if our calculations are correct.

Data Set

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QPR: Boys Don’t Cry

Introduction: In Between Days

QPR announced their financial results recently for 2016/17, which revealed that they made a loss of over £6 million before tax. Overhanging this is a potential Financial Fair Play (FFP) of somewhere between £40-50 million, which relates to their promotion in 2013/14 in the Championship, which has kept lawyers for both the club and the Football League (EFL) in riches for the last few years.

QPR’s accounts are possibly the most WTF figures in football, as large sums seem to appear and disappear at the whim of owner Tony Fernandes (isn’t he a Steve Coogan creation? Ed) and his entourage of billionaire chums who also own shares in the club.

Income: Never Enough

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Not all clubs have announced their results for 2016/17 yet, but most clubs are showing higher income than in the previous season. The average income of the 16 clubs that have reported to date (which excludes some big hitters such as Newcastle and Leeds) is £32 million.

In 2015/16 the average for a Championship club was £22.9 million. The main reason for the increase is due to a combination of higher parachute payments, along with a new TV deal in the Premier League, which drips down to the Championship in what are called ‘Solidarity Payments.

Like all clubs QPR earn their income from three sources, matchday, broadcasting and commercial/sponsorship.

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The table shows how much Rangers benefitted from being in the Premier League in 2012/13 and 2014/15, but also how much the club is reliant on parachute payments now that they are back in the Championship.

Matchday income was down 5%, which is reasonable considering that Rangers finished 18th, crowds averaged 14,616, up 600 on the previous season.

Broadcast income was up 19%. This was due to the new Premier League TV deal which started in 2017/18. Parachute payments are a fixed percentage of the Premier League equal share payments. Parachute payments will however halve in 2017/18 to about £17.6 million for two seasons. After that date the club will then only be entitled to solidarity payments and a share of the EFL TV deal, which works out about £7 million a year.

QPR presently get about ¾ of their total income from parachute payments, but this will fall, and it’s important that they control costs whilst this is occurring.

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QPR’s commercial income rose 10% to £7.5 million. This was mainly due to new kit manufacturers and shirt sponsors.

Costs: Accuracy

The main costs at a football club are player related, wages and transfer fee amortisation. QPR’s policy since relegation in 2015 is different to when the same thing happened in 2013.

In 2013/14 the approach was to take on the Football League and FFP and pay whatever it took to return to the Premier League.

This time it appears that the club has concentrated on removing some big earners from the wage bill, either by selling players or allowing their contracts to expire.

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Wages fell by a quarter but are still reasonably high by Championship standards, where the average for last season was about £27.3 million.

Amortisation is how clubs deal with transfer fees in the profit and loss account. When a player signs for a club the transfer fee is spread over the life of the contract. Therefore, when Leroy Fer from Norwich for about £9 million on a three-year deal, this works out at about £3 million as an amortisation cost each year.

QPR have spent over £64 million on signings in the last three seasons, which helps explain why the amortisation charge is over £10 million a year. Even taking into consideration players subsequently sold who were with the club in the Premier League, this cost is sizeable, but should fall as player contracts expire.

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Putting these two costs together highlights how much QPR ‘went for it’ in 2013/14, as for every £100 of income generated, there was a £238 cost in terms of wages and amortisation.

Whilst the club was still spending nearly all its income out in wages in the first season relegated (2015/16), it does appear that there is now some sanity in controlling wages in 2016/17.

Losses: Grinding Halt

Losses are income less costs. The bad news for Rangers is that the club lost money last year for the fifth season in a row. The good news is that the losses were only a fraction of those of previous seasons, and the club nearly broke even.

Operating losses are the trading losses of a club, and they exclude interest costs.

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Under FFP rules, QPR can make a maximum FFP loss of £35 million for each season in the Premier League, and £13 million for each season in the Championship. This gives a total of £61 million, so the club, with operating losses in that period of £54 million, appears to be well within that limit. If interest costs are added in, things because a bit more squeaky bum time. QPR had bank/loan interest of £8.9 million over the period, which takes the total loss to £63 million, just over the limit.

The interest costs seem expensive, as the interest rates being charged are £12.6% on £30 million and a payday loan-like 26.8% on £4 million. This approach conflicts with the owners writing off over £240 million of loans elsewhere.

Fortunately, some costs, such as infrastructure, academy and community schemes, are excluded from the FFP calculations. QPR have a category 2 academy, which insiders estimate cost most clubs at least £1.5 million a year. Add in a million and a half depreciation costs a season for other allowable FFP expenses and QPR’s FFP losses are probably about £54-55 million over the last three years.

For the three years ending 2017/18, QPR can have FFP losses of £39 million. Their good performance in 2016/17 in almost breaking even suggests this should be achieved with relative ease.

Player trading: So What?

The accountants treat player trading in a weird way in the accounts. 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

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The chart shows what most fans would expect to be the case. In the Premier League clubs spend more on players than they receive from sales, and in the Championship the reverse arises.

What might surprise Rangers fans is that the club has spent so much money (£25 million) in the last two seasons in the Championship on signings, when the general feel is that belts are being tightened.

Debt: Wrong Number

The treatment of debts due to QPR’s owners has been the issue on which the FFP conflict with the EFL has been based.

In 2014 the owners wrote off £60 million of borrowings owed by the club and treated the sum as income. This reduced the losses for 2013/14 from £69 million (which that year would have generated a FFP fine of £40-50 million) to £9 million (which meant no fine).

The owners have subsequently written off further loans of £180 million, but this time the loans were converted into shares, and this has no impact upon profits (or FFP losses).

QPR’s owners have argued that FFP is illegal, and therefore no FFP fine is payable. The EFL argue that FFP is part of their rules, and as such applies to all clubs who choose to play in the league.

The lawyers have grown rich on who is right and who is wrong (and let’s face it, you don’t see too many selling The Big Issue).

The case eventually went to arbitration, and the EFL was successful.

http://www.bbc.co.uk/sport/football/41736013

QPR are not finished though and are refusing to accept the judgement (cue more holiday homes in Barbados for the lawyers).

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If the Football League is successful, then the FFP fine will be paid to charities. Whilst the club would struggle to pay such a large sum, the owners are billionaires, and one would hope they would settle the bill, as it was there decision to ignore FFP initially that caused the dispute.

Summary

QPR have done well in 2016/17 to get their house in order. The final league position reflects the cost cutting at the club, which has continued this year. It looks as if the largesse of the past has been replaced with a more cautious approach to managing the club’s finances. Fans must hope that the owners don’t get bored of being mid table in the Championship and lose all interest in the club.

Until the FFP issue is resolved the club will not look an attractive investment proposition to new potential owners. Crystal Palace have shown that there is space for a small London club to survive and make money in the Premier League, so there will be potential new owners/investors perhaps thinking the same about QPR.

Data Set: Alt.end

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West Ham United 2017 Financial Results: Fool’s Gold

After an emotional farewell to the Boleyn Ground the previous season, West Ham moved to the London Stadium, and fans had high expectations that the club could start to chip away at the glass ceiling of the self-styled ‘Big 6’, who have a disproportionate share of the income, and therefore best players, within the Premier League.

Those hopes failed to materialise. A poor start in the Europa League, where they were knocked out before the group stage by the team that finished 6th in the Romanian League the previous season, was followed by problems with the new stadium in terms of logistics, stewarding and atmosphere. A spat with the council resulted in the capacity of the London Stadium being capped at 57,000.

In terms of finances, the boost from moving to a more modern stadium seems to have been a mirage in some ways, and fans are unhappy, losing their home is one thing, losing it and having no benefits is another.

Income

Clubs have three main sources of income, matchday, broadcast and commercial. In 2016/17 West Ham’s income rose by 29%, so it looks as if Sullivan and the Gold brothers (whom Claudio Ranieri apparently calls Dilly-Dee and Dilly-Do) had masterminded a superb transformation of the club. Over the last five years the club’s income has more than doubled, how much of this achievement is due to the owners, and how much is due to happenstance?

Matchday

Moving from a 35,000 to a 66,000 capacity stadium in theory should have created a big bump in matchday income, but the move only resulted in a 6% increase from £26.9m to £28.6m.

There are a number of possible issues in relation to this surprisingly low increase.

West Ham had a dispute with the landlord and licence holders of the London Stadium, which restricted capacity to ‘just’ 57,000, although this is still substantially higher than the Boleyn Ground.

Season ticket prices were available from £299, and Under-16’s just £99, which looks from afar as if the owners were using a combination of a new TV deal and higher attendances to make watching the club more affordable.

It could also be that the figures for the final season at the Boelyn were inflated by extra income generated in relation to moving from the stadium, as they are substantially higher than 2014/15.

Compared to other clubs in the Premier League who have reported to date, West Ham are stuck in the middle.

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The above shows how many millions are generated by matchday income, and the proportion of total income from that source.

Matchday is worth £1 in every £6 of total income to West Ham.

If the club are serious about competing with the regulars at the top of the division, then they need to work out how to get more money from matchday income.

Liverpool increased their capacity to 54,000 in 2016/17 by extending the main stand, but many of the additional tickets are sold to the prawn sandwich brigade, who are prepared to pay premium prices.

West Ham also have a large number (52,000) of season ticket holders. Add 3,000 away fans, and that only leaves 2,000 tickets available for irregular fans each match.

Like them or loath them, these fans/daytrippers/gloryseekers/football tourists (delete as necessary) generate a lot of money for a club, as they pay higher prices for tickets and are more likely to spend money on merchandise.

Some other clubs, with a more international fanbase, exploit this by restricting the number of season tickets to maximise their return from the football tourist brigade.

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West Ham would have earned more money per fan had they progressed further in the Europa League, but Chelsea also did not have a European campaign, and they earned twice as much per fan.

Some credit (awaits flaming) could be given here to Sullivan/Gold for not taking fans to the cleaners in respect of prices.

Broadcasting

Broadcasting income was up by over a third to £119 million. This was due to the Premier League’s new deal with BT/Sky commencing.

The deal is for three years, so there will be no significant changes in this income source unless West Ham can (a) increase the number of appearances on television (they get £1 million for every additional appearance above ten), (b) Qualify for European competitions, or (c) Achieve more success on the pitch and move higher up the table (each position is worth £2 million more than the one below, so finishing 7th instead of 11th is worth £8 million to a club).

Whilst relegation is a nagging doubt rather than a huge concern at present this season, clubs in the Championship with parachute payments initially earn about £41 million from this source, and those without parachute payments about £7 million.

West Ham presently earn about two-thirds of their income from TV.

Winning the Europa Cup was worth £40 million in TV money last season to Manchester United, West Ham picked up £400,000.

Commercial

West Ham’s commercial income rose by a quarter to £35 million. This is impressive, but also reflects the market in which the club operates.

They don’t have the same international appeal as Manchester United, Liverpool or one or two other London clubs (clearly excluding small outfits such as Palace).

This means that they are competing with the likes of Everton, Newcastle, Southampton etc for the sponsors dollar.

We’ve heard anecdotal stories of sponsors playing clubs off against each other, so that if West Ham are looking for £10 million for a shirt deal, the sponsor will say “Newcastle will do it for £6 million, so drop your asking price or we go elsewhere”.

From the point of view of a generic overseas bookmaker, they don’t particularly care whether their logo is on the front of a Burnley, West Brom or Palace shirt, so long as it gets regular exposure on TV.

It looks as if West Ham have leveraged on the move to the new ground to increase commercial income, and there are potential future gains here too as old deals the.

This issue has implications for financial fair play too, as clubs are limited a £7 million increase in wages each year, plus any money generated by matchday, commercial income and gains on player sales.

The new stadium does give West Ham some scope to increase this income source, but the relationship with the landlord does restrict some of these opportunities.

They should therefore be at the top of their peer group of non ‘Big Six’ clubs (and Spurs are not really part of that elite to be honest), which will give them some additional buying power in the player market.

Costs

The main costs for a club are player wages and player amortisation (transfer fee costs spread over the life of the contract).

So when Andre Ayew signed for West Ham in 2016 for £20 million on a four year contract, this works out as an amortisation cost of £5 million (£20m/4 years) a year.

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West Ham’s wage bill rose by 12% to £95 million in 2017. It’s a significant increase and puts the club ahead of some of its rivals, but is still behind Everton (£105m), Leicester (£112m) and some others that the club probably considers to be in the peer group.

The amortisation charge increased too, and if the two elements of player costs are added together then West Ham have doubled their player running costs over the last five years from £70 million to £140 million.

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There’s a huge gap between this group of clubs and those that have dominated English football in recent years, and it’s difficult to see, especially with the new wage control rules of Financial Fair Play (FFP) how this can be bridged, unless the club qualifies for Europe, and for that you need better players, who want higher wages. This vicious circle prevents anyone breaking through the glass ceiling.

Although player wages are not disclosed, companies must show the pay of the highest paid director. In the case of West Ham this was £868,000, slightly lower than the previous year, but enough to allow the recipient to have the occasional pie and mash.

Whilst the name of the highest paid director is not shown, we suspect she has the initials KB.

One new cost for West Ham this season is the rent of the London Stadium. For reasons best known to themselves the accountants call rent ‘operating leases,’ and this rose by about £2 million in the year, which is in line with the figures quoted in the media.

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As well as the running costs of the club, there are interest costs in respect of borrowings made by the club.

Fans might have thought that the club would have been able to repay all debt following the sale of the Boleyn, and therefore not pay any interest, but they would be wrong.

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The club’s interest cost worked out at £97,000 a week in 2016/17. Whilst this is a lower figure than the previous season, half of it went to shareholders, in the form of loans from Gold and Sullivan.

This does mean that they strictly are correct in claiming never to have taken a penny as a wage from the club, trousering £50-60,000 a week in interest should prevent them from needing to sell The Big Issue just yet.

Gold and Sullivan have charged the club £14,875,000 in interest on loans since 2011/12.

Profit

Profit is an abstract concept, in theory it should simply be income less costs. In practice there are a range of profits quoted, depending on which costs are included.

West Ham in their press release stated they made a record profit of £43 million for 2016/17, which is the profit after tax figure. This is however after considering gains on player disposals, including that of Dmitri Payet, which generated profits of £28.4 million.

In addition, the club showed a profit on the sale of the Boleyn Ground of £8.6 million, and here we enter some choppy financial waters, which will be discussed in depth further in this epistle.

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Whilst we expect to see clubs making a profit on player sales each year due to the way player signings are treated in the accounts, this figure is volatile as it depends on individual player disposals.

Excluding player disposals, West Ham’s EBIT profit (which is profit excluding one-off transactions such as the Boleyn transaction and player sales, before interest and tax) was £11.4 million, much lower than the quoted figure, but still an improvement on the previous year’s EBIT loss of £3 million.

The move to the new stadium may have helped here a little, but the main driver has been the extra £33 million of TV money.

Adding back the non-cash expenses in the form of depreciation and amortisation gives an EBITDA profit of £58 million, which is 77% higher that the previous year’s £33m. It is this profit figure that many analysts use when valuing businesses, and here West Ham have done reasonably well.

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Player activity

West Ham spent a record £80 million on players in 2016/17, including Ayew, Snodgrass and Lanzini. Whilst this exceeds the club’s previous transfer activity, there is still a gap between the club and those they seek to compete with.

If you take away player sales from the purchases, then West Ham’s net spend was £40 million, roughly in line with the previous season.

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Hidden in the footnotes to the accounts are a couple of interesting figures (interesting only to those who are still reading this tedious summary we suspect). The first is contingent liabilities.

This is the sum the club must pay to players and former clubs if certain achievements (appearances, trophies, international caps etc.) are met. This was £2.3 million and compares to £111 million for Manchester City and £45 million for United at the end of June 2017.

This suggests that West Ham have a different approach to the two Manchester clubs when signing players, aiming for a set fee with little based on future performance.

Borrowings

Many owners lend money to their clubs, if you look at the likes of Middlebrough, Newcastle (with the hated Mike Ashley), Brighton, Huddersfield, Stoke and so on, they all have owner lenders.

What these clubs also have in common is that the owners don’t charge interest on these loans.

Messrs Gold and Sullivan have lent the club £45 million, but have charged interest at 6% interest. The club then paid the owners £10 million in partial payment of the interest that had clocked up in August 2017.

This is perfectly legal, if somewhat at odds with the philanthropic approach taken by many other club owners.

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The sale of the Boleyn Ground

It’s very confusing working out exactly what has happened in terms of the financial treatment of the club’s old stadium. If we’ve not bored the pants off your already, stop reading now, as it’s about to get even more tedious.

The club booked a profit of £8.6 million on the sale, but the history of the ground in the accounts is best described as erratic.

In 2012 the Boleyn was measured at a fair market value of £71.2 million. Admittedly this was for the stadium as well as the land surrounding it.

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The following year the club decided to change the way it measured the Boleyn in the accounts, on the grounds that it was moving to the London Stadium.

This meant that the value of the stadium fell by about £40 million.

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By the time the club had vacated the Boleyn in June 2016 the accounting value was about £30 million. However, this bears no resemblance to a market value. If the club booked a profit of just under £9 million then the sale price appears to be about £39-40 million.

According to the club, it sold the Boleyn to a property development company called Galliards, and inferred that they had turned down higher offers, but that Galliards would preserve some of the history of the club.

However, there appears to be a third party involved called Boleyn Phoenix Limited.

Boleyn Phoenix Limited was incorporated in January 2014 and is listed as a property development company. It has two shareholders, Galliard Holdings Limited and Mount Pleasant Developments Limited.

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Boleyn Phonex was mentioned by Newham Council in relation to the redevelopment of the Boleyn Ground. The comments were not very positive.

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Boleyn Phoenix Ltd had no sales in the first few years of trading, but in the year ended 31 March 2017 sprung into life and showed a profit of over £16.7 million. A screenshot of a cell phone Description generated with very high confidence

Having made a huge profit, presumably on a deal for a property costing about £40 million and selling it for nearly £60 million. Boleyn Phoenix rewarded its shareholders by paying them a dividend of nearly £16 million.

Could this property have been the Boleyn Ground itself? It could be a coincidence.

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Therefore Galliard Holdings would have received a dividend of nearly £8 million, as would Mount Pleasant Developments Limited.

Mount Pleasant Developments Limited have one shareholder, Vince Goldstein.

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Now clearly there could be many Vincent Goldstein’s around, but a quick bit of Googling brings one to the fore in terms of property development.

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This particular gentleman (who may or may not be the shareholder in Mount Pleasant Developments) is connected to the Rock Group and is the cousin of the former Vice-Chairman of Spurs, Paul Kemsley, who some may know from ITVBe’s magnificent The Real Housewives of Beverley Hills, where his wife, Dorit Kemsley, is one of the stars.

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According to West Ham the Boleyn was sold to the Galliard Group, which could perhaps have been Boleyn Phoenix. The Boleyn Ground was then rapidly sold to Barratt Homes.

The Land Registry says that the price paid for the Boleyn Ground by Barratt was £40 million, which begs the question, how did Boleyn Phoenix make a profit of nearly £20 million?

There’s no evidence of any wrongdoing, it’s just a bit…odd.

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Summary

West Ham’s accounts provide as many questions as answers. There’s a lot of bad blood at present between the club owners and some elements of the fan base. More transparency in relation to the club and its transactions would possibly help resolve some of the differences.

The hope that the move to the London Stadium doesn’t seem to have pushed the club onto the next level of success in the Premier League, and this is why some fans are wondering was it worth losing their spiritual and cultural home that was the Boleyn Ground.

As Alice said to the rabbit ‘Curiouser and curiouser’.

Data Set

Sheffield Wednesday: Play to win

Sheffield Wednesday announced their results for 2016/17, which revealed that they made a loss of nearly £21 million in the season, as the club invested heavily in a promotion push, which faltered in the playoffs against Huddersfield.

Since then there’s been a debate on social media in relation to the present level of financial distress experienced by the club, with some suggesting that administration is feasible, so we’ve taken a look.

Income

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Not all clubs have announced their results for 2016/17 yet. In the previous season the average for a Championship club was £22.9 million, we expect this to be higher in 2017/18.

Like all clubs Wednesday earn their income from three sources, matchday, broadcasting and commercial/sponsorship.

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The good news for Wednesday is that matchday income rose by 10% in 2017. Attendances averaged 26,831, an increase of over 4,000 in the previous season, when the club made the playoff finals.

This means that Wednesday are at the top end of clubs in the division for this income source, slightly behind Villa and Brighton, but more than double the amounts earned by smaller clubs in the division.

Despite an indifferent season on the pitch for 2017/18, the club is still averaging over 26,000 in 2017/18.

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The bad news is that matchday income is dwarfed by parachute payments given to clubs who have been recently demoted from the Premier League. Whilst it brought in over 40% of Wednesday’s income, Norwich, Newcastle and Villa each earned over £40 million in parachute payments, which gave them an advantage in the transfer/player markets.

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Broadcast income was down 7%. This was partly due to Wednesday only getting as far as the playoff semi-final, compared to the previous season when they made it to Wembley, which was worth a couple of million to the club. The decrease was cushioned partially by a new Premier League (PL) TV deal that came into existence in 2016/17, and under the terms of a deal with the Football League (EFL) the money given to EFL clubs is a guaranteed percentage of PL TV revenues.

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Wednesday’s commercial income rose 17% to £6.6 million. This has provoked some bitching from fans of other clubs, who have queried the nature of some of the commercial deals, as some were struck with the club owners’ the Chansiri family.

The value of these transactions, at £1.2 million, does not seem particularly excessive, especially when compared to the likes of Leicester City, who in 2013/14 mysteriously tripled their commercial income after the involvement (ironically) of former Sheffield Wednesday Chairman Sir Dave Richards in obtaining some new sponsorship deals in the Far East.

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Leicester have just agreed to pay a £3.1 million fine in relation to their 2013/14 accounts, which had the EFL’s W-T-F-Ometer clicking in the red zone for the past few years.

Costs

The main costs at a football club are player related, wages and transfer fee amortisation. Wednesday invested significantly in both of these in 2017/18.

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Wages increased by 52% in 2016/17, to £29.1 million. This was due to signing some Premier League players on loan, such as Jordan Rhodes and Callum McManaman the free transfer acquisition of Steven Fletcher, on an alleged £30,000 a week, and new a new contract for top scorer Forestieri.

Amortisation is how clubs deal with transfer fees in the profit and loss account. When a player signs his contract cost is spread over the life of the contract. Therefore, when Adam Reach signed from Middlesbrough for about £5 million on a three year deal, this works out at about £1.67 million as an amortisation cost each year.

Wednesday spent over £24 million on players in 2015/16 and 2016/17, so the amortisation charge jumped accordingly.

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Putting these two costs together highlights how much Wednesday ‘went for it’ in 2016/17, as for every £100 of income generated, there was a £152 cost in terms of wages and amortisation.

The problem that this gives Wednesday is that many of the players involved will be on multi-year contracts, and therefore it will be a challenge to reduce such costs.

Overall, Wednesday spent £1.91 for every £1 of income in 2016/17, split as follows:

Losses

Losses are income less costs. Last season this was £20.7 million, up from £9.7 million the previous season. This leads to two key questions (a) are such losses sustainable, and (b) what are the Financial Fair Play (FFP) consequences.

The owner of Wednesday, Dejphon Chansiri family, is estimated to be worth at least £700 million, so the money is there, assuming he wants to keep spending it.

In terms of FFP, the present incarnation (called Profitability and Sustainability) limits clubs to a loss of £39 million over three seasons.

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Looking at Wednesday’s recent accounts, the club has lost money every year, but the total for the last three years comes to £34.3 million. Some costs, such as infrastructure, academy and community schemes, are excluded from the FFP calculations. A conservative estimate of these would be about £8 million, so Wednesday’s FFP losses are probably about £26 million over the last three years.

If this is the case, whilst Wednesday don’t have a huge amount of wiggle room for 2017/18, the club should satisfy FFP this season. The manager will however be unable to spend a huge amount in the transfer market in summer 2018.

Player trading

Wednesday, as already mentioned, have spent significant sums by their standards in the last two seasons.

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There’s no doubt Chansiri has backed managers in the transfer market, and that has contributed towards two appearances in the playoffs. The lack of success in the current season is of greater concern, and there will be less opportunity to sign players in the forthcoming transfer window unless they are funded by player disposals.

It looks as if player contracts contain substantial bonuses should the club be promoted, with player bonuses of £7.5 million and payments to former owners of over £1 million. Compared to the £100 million of TV money, this is relatively insignificant.

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Debt

Chansiri has put substantial sums into the club, and at the end of the financial year was owed about £38 million in loans on top of £45 million invested in shares. His benevolence appears at present to be unconditional, so Wednesday fans should not worry about the owner wanting to sell up or stop supporting the club financially.

Summary

Wednesday are in a slightly awkward position, having spent heavily in the last couple of seasons on player recruitment and not being rewarded by promotion.

At the same time, rumours of their impending financial implosion appear to be vastly overstated.

Data Set

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Preston: Maybe Someday

 

Clubs in the Championship lost £366 million in 2015/16, and that figure could easily be exceeded in 2016/17, as many clubs gambled on big signings and big wages to try to make the £100 million a year broadcasting income of the Premier League.

Preston haven’t taken such a route, but they have still managed to finish 11th in the Championship in the last two seasons, without troubling either the playoff chasers, or those in the relegation scrap.

That has come at a cost, as the club lost £67,000 a week last season, but that is chickenfeed compared to the losses of some other Championship clubs.

Income

Football club income is broadly split into three areas, matchday, broadcasting and commercial.

Less that half the clubs in the Championship have reported their results to date, but the gap between those who receive parachute payments and clubs such as PNE who don’t, is significant.

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PNE’s income was a fifth of the sum received by Norwich and Villa (and will be the same in relation to Newcastle when they publish their results), so to finish mid-table was a creditable achievement.

PNE have increased their income over the last few years as a result of promotion to the Championship and benefitted from the new Premier League TV deal too. This ripples through to the Championship in what are called ‘solidarity’ payments. These are worth about £6.5 million a year to Championship clubs.

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Matchday income is mainly ticket sales. Preston’s crowds averaged 12,600 in 2016/17, about 400 lower than the previous season. This puts them in the bottom half of attendances in the division. Preston’s matchday income is about a quarter of the total.

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The big difference in the division is broadcast income. In the Championship it is a case of the have’s and the have nots, due to parachute payments. Clubs who are not in receipt of these earn about £6.5-7 million in solidarity payments from the Premier League, less than half the sum earned by the lowest paid parachute recipient.

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Costs

The main costs for a club, especially in the Championship, are wages. During 2015/16 clubs paid out on average £101 in wages for every £100 of income. There’s been a slight improvement in 2016/17 to date, with the figure dropping to £93 (mainly due to parachute payments boosting income, rather than wages decreasing).

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For Preston, it appears that any increase in income each season is paid out in wages. Every time money earned goes up, there is an immediate increase in the money going out of the club. Alan Sugar describes this as the ‘prune juice effect’, although I cannot remember the last time that anyone ever ate any prunes.

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Even when Preston were in League One, they paid out all their income in wages. This leaves relatively little room to sign players and pay the day to day overheads of running the club.

Player amortisation costs are the cost of transfer fees divided by the length of the contracts signed by players. So if PNE sign a player for £1 million on a four year contract, the amortisation cost is £250k a year for four years.

Fortunately, the club’s losses are underwritten by the owner, Trevor Hemmings.

Losses

Profits (or in the case of most non-Premier League football clubs losses) are the difference between income and expenses.

Clubs in the Championship lose money because so many owners are willing to gamble on promotion by investing in players and wages.

PNE don’t seem to have taken such an extreme approach, but to be competitive they have made losses every year.

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Trevor Hemmings seems happy for PNE to lose about £70-80,000 a week. This has been the level of losses over the last five years, which have totalled £19.5 million. The club has sold some players at a profit over that period, such as Joe Garner, but in the main the club has been relatively quiet in terms of big money signings in and out.

Player Trading

PNE spent big by their own standards in 2016/17, buying players for just over £2 million, compared to an average of £300,000 in the previous four seasons. By Championship standards PNE’s activities were very modest. They didn’t need to sell players to satisfy Financial Fair Play, and there were not a long line of suitors for their stars. Consequently the club was rarely mentioned on the back pages of the national newspapers.

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The above table shows the amount spent by clubs on new players (Gross signings) and the amount after taking into account player sales too (Net signings).

PNE seem to be happy to be towards the bottom of the table, and hope for a good season, perhaps unearth a gem or two, and some successful loan signings, to then challenge in a similar manner to the likes of Burnley, Blackpool, Wigan, Huddersfield and small London outfit Crystal Palace have done in recent years. If it works, then the club could earn a lot of money.

Summary

PNE have shown it is possible to survive with relative ease in the Championship without spending huge sums of money. At the same time they have achieved that by spending every penny they earn on player wages, and relying on an owner to cover the remaining costs of running the club.

They have significant debts due to the owner of about £30 million, but it’s unlikely that there will be a request to repay these sums.

It’s a model that could turn out to be successful, with PNE presently just three points off a playoff place, and if they do get that far the rest is a lottery, with a big prize for the winning ticket.

Data Set

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Coventry: Too Much Too Young

I might be talking utter bilge (Not for the first time: Ed) but Coventry City, by being relegated to League 2 last season, became the first team in the inaugural season of the Premier League to drop to that level. Even winning the Checkatrade Trophy last season could not paper over the cracks of relegation.

Their finances over the last decade, under a series of opportunists, asset strippers, charlatans and scumbags, have suffered a similar decline.

For a few seasons their holding company, Sky Blue Sports and Leisure Ltd, also included the activities of ProZone, which was under the club’s control when Ray Ranson (yes, that one) was in charge.

Ranson, who according to Wikipedia is an entrepreneur, (not sure what that really is,  probably a posh word for twat) disappeared over the horizon after introducing the club to… Cov’s present owners, a London based hedge fund called Sisu, who, in keeping with the behaviour of most hedge funds, are low on communication and short on morality.

Their involvement in Coventry appeared to be to take over the club when it was in the Championship, potentially make a profit from a return to the Premier League and/or buying the Ricoh stadium as a knock down price, and then riding out of town.

Coventry also presently hold the unenviable title of the last Football League club to enter administration, which appeared to be a strategic move at the time by Sisu to try to force the hand of the owners of the Ricoh to sell the stadium. No one comes out of the negotiations with any credit.

It’s difficult to put into words such cynical behaviour by the owners, but ‘twats’ covers most aspects of their activities.

Coventry have just produced their annual results, so we’ve had a quick look.

Income

Most clubs split their income into three areas, matchday, broadcasting and commercial. For some reason Cov don’t follow suit, and only show matchday and commercial.

It is possible to estimate the figures from broadcasting income (currently about £6.5 million in the Championship, £650,000 in League One and £450,000 in League Two), but the headline figures show what has happened to Coventry starkly enough, especially since their relegation to League One in 2012.

At least last season there was a 10% bump in income, mainly due to the Checkatrade Trophy final appearance.

A move to the Sixfields Stadium in Northampton, boycotted by many fans, had a negative impact on income too.

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Income does not include player sales, this is because (a) the business of a football club isn’t really to trade players, and (b) gains on player sales are very volatile and distort the headline figure for income.

Sisu seemed to believe there would be a continual production line of players at Coventry who would generate money for the club. This has not proven to be the case.

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The above table shows the erratic nature of player trading. For a League One club, Coventry have done very well in selling the likes of Richard Keogh, Callum Wilson and James Maddison for seven figure sums, but that is not sustainable or predictable.

Costs

The main costs for football clubs are usually player wages and transfer fee amortisation (the cost of a transfer divided by the length of the contract). The latter is less of an issue in the lower leagues, as many clubs sign players on free transfers and loans.

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The above shows that Cov, when in the Championship, were paying competitive wages, and signing players for reasonable fees. This wasn’t enough to prevent them finishing 17th, 19th, 18th and finally being relegated as 23rd in the four seasons to 2011/12, but at least it was playing against some glamourous opposition in front of fair crowds.

Since then wages have had to be cut to prevent losses becoming unsustainable, although they look too high for anyone other than a huge optimist when compared to income.

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The above shows how much a club is spending on wages and transfer amortisation compared to income. When Coventry were first relegated to League One in 2012/13 they were paying out £107 in wages for every £100 of income, and this increased to £146 of wages for every £100 the following season. Last season, despite, or perhaps because of relegation, the club appeared to have its wage bill under control, with only £73 in wages for every £100 in income.

Because Coventry don’t own the stadium, they have to pay rent. The ‘good’ news is that the rental fee appears to have come down since the dispute with the landlords, the bad news is that it appears to be on the rise again.

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Coventry don’t appear to get many benefits from renting the stadium from owners Wasps though, who apparently take the lions’ share of advertising and catering income on matchdays.

For every £1 of income last season, Coventry has expenses of £1.48, allocated as follows:

Losses

Losses are the difference between the income generated by the club and the costs of running it on a week to week basis. We have already seen that in some years the wage bill exceeded income, add rent and other costs into that equation and it’s not a pretty sight.

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Whilst the club made an operating profit of £602,000 in 2015/16, this was shored up by a profit on the sale of James Maddison, which was worth nearly £2.5 million. Other than that, every year has been loss-making in the last decade.

To underwrite these losses, the club has had to borrow money, mainly from Sisu, but also from a mysterious (and not in a good way) Cayman Island business called the Arvo Master Fund.

No one knows who is behind Arvo, what their intentions are, and when they want their money back. All that can be seen is that Arvo (and Sisu too on some loans, although other borrowings are interest free) are adding interest costs to the loans each season.

A bit of Googling of Arvo’s address reveals this to be the location.

When Sisu first became involved with Coventry the annual interest payable was less than £200,000 a year, substantial but bearable. For the last few years it has averaged £2 million a year, which for a business with a turnover of £5-6 million is eyewateringly expensive. On reflection, whilst we don’t know who Arvo are, the word twats would suffice here too.

Player signings

With all these sums going out of the club, it is unsurprising that there has not been a huge amount to invest in the playing squad.

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Since 2009 Coventry have signed players for £7.8 million, and their interest payable on loans was £13.1 million. I suspect most fans would not be happy with that, although some of the bankers can’t have been much worse than some players signed by Tony Mowbray.

Debts

Coventry are in a horrible position, as they have no assets (as renting the stadium) apart from the players, and they owe the owners about £42 million, most of in in the form of loans, but some as unpaid interest.

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Whilst borrowings appear to have peaked in 2013, all that has effectively happened is that the dark artists of finance (who we, for the sake of brevity, will call twats) have swapped one type of piece of paper for another. Some of the debts are disguised elsewhere in the balance sheet.

Summary

You have to feel for Cov fans, apart from an occasional day out in the Cup or a trip to Wembley for the Checkatrade last season, they’ve had nothing to cheer about for ages. Fans of many clubs will know that sickening feeling of being uncertain whether you will have a club to support in a few months time, and that’s where Coventry currently sit.

Their owners have negotiated a 12 months lease to carry on playing at the Arena from owners Wasps, but you cannot build any type of business on such short term negotiations.

All that fans can do is hope for a white knight to rescue them, cut a deal for the Ricoh or build a new stadium. White knights are in short supply, sadly, for Coventry fans, twats aren’t.

DataSet

Aston Villa: Burning Sky

Aston Villa 2016/17 

Introduction: 

Aston Villa Football Club Ltd announced their financial results, which were published in the local newspapers, and fans sighed with relief.

The fears that the club was heading into a Financial Fair Play (FFP) meltdown seemed overstated, as the losses of £7 million quoted in the papers appeared to give wiggle room in terms of the £39 million losses allowed over three years.

However, there’s a problem, and it’s a sizeable one. Aston Villa Football Club Ltd doesn’t cover all of the activities of Villa, and certain costs, most notably player wages, are excluded from the costs. The accounts being reviewed by media sources and fans alike are not the ones used to determine the true extent of Villa’s finances.

To see the true picture, it is necessary to take a look at the snappily named Recon Group UK Limited, (previously Recon Sports Limited, previously Reform Acquisitions Limited), controlled by the forever positive owner Tony Xia, via his investment vehicle, Zheijiang Ruikang (Recon) Investment Co Ltd, based in China.

Recon Group’s profit and loss account showed a more worrying operating loss of £41.1 million (£791,000 a week in old money), and it was only the sale of some players that brought this down to a more palatable loss of £14.5 million.

The previous year the losses were £81.3 million before player sales, although some of the calculations were perhaps best filed away under the heading of ‘creative’.

All is not lost however for Villa, as despite what was a fairly dreadful 13th place finish in the Championship on 2016/17, they are now in the running for promotion back to the, if not promised, land of the big bucks TV deals that is the Premier League.

Profit and Loss account

Profit is the difference between income and costs, so we will start with a look at the former.

Income

Villa’s total income for 2016/17 was £73.8 million, a lot of money, but 32% down on the previous season, and the lowest for a long time.

Only half a dozen clubs who played in the Championship have reported financial data to date, but Villa are presently second behind fellow parachute payment recipients Norwich. We would expect Newcastle to take the top spot whenever Mike Ashley deigns to reveal that club’s details.

The above graph shows the impact that parachute payments have on a club’s income, with Villa receiving £421 for every £100 generated by local rivals Birmingham City, and £253 for every £100 of promoted Brighton.

Clubs generate income from three sources, matchday, broadcast and commercial, so how have Villa suffered as a result of relegation?

Matchday

Villa had about 9,000 empty seats for each home game in the Premier League in 2015/16, and average attendances fell further in the Championship,  albeit to a still creditable 32,000.

Gate receipts were down 14% to £10.7 million, which is about the same amount that Sky are currently paying for each match they broadcast live.

Villa’s matchday income is high by Championship standards, and compares well to provincial clubs in the Premier League, such as Stoke (£7.2 million), but is some way behind clubs that Villa might benchmark itself against, such as Newcastle (£25m) and West Ham (£27m).

Broadcasting

Villa were in some ways lucky to have survived as long as they did in the Premier League before being relegated, as their parachute payments benefitted from the new deal that commenced in 2016/17.

Villa earned £65 million from TV in 2015/16, which was the final season of the previous three-year deal. Parachute payments are however linked to the season in which Sky and BT pay the Premier League, and so Villa (as well as Norwich and Newcastle) had the blow cushioned due to the new £5.1 billion deal commencing in 2016/17.

This meant that TV money fell to ‘only’ £48.1 million last season, still a drop of just over a quarter, but the decrease would have been far greater had the club been relegated a year earlier.

Parachute payments last for three years in the Championship, decreasing year by year. As can be seen, Villa need to return to the Premier League within that timeframe to avoid a big hit when the parachute runs out.

Commercial

This more than halved last season. Sponsors want their logos and billboards to be seen in the globally popular Premier League, and many have relegation clauses built into long term deals that they sign with clubs.

Villa’s income was down to £15 million in 2016/17, which still compares well to the rest of the Championship, but is far lower than the average in the Premier League of £55 million.

Costs

A football club’s main costs are in relation to players, and Villa are no exception in this regard.

The wage bill for 2016/17 was £61.5 million, down from £93 million the previous season in the Premier League, giving a wage to income ratio of 83%, which meant that Villa were paying out £83 in wages for every £100 of income they generated.

In order to get the wage bill down there were significant job losses at Villa, with full time employee numbers falling from 543 to 401, mainly in the commercial and merchandising departments.

In the Championship the previous season the average wage bill was £23 million, compared to £112 million in the Premier League.

Whilst this seems a high figure, the Championship is such an ill-disciplined division that the previous season paid out more in wages than it generated.

That figure of 83% is kept low by parachute payments.

The other cost relating to players is that of player amortisation. This is how the club deals with the transfer fee when a new player is signed. The fee is spread (amortised) over the life of the contract. Therefore when Scott Hogan joined Villa for £15 million on a four and a half year contract, this worked out as an amortisation cost in the profit and loss account of £1.67 million last season (6/54 months x £15 million), which will be £3.33 million in 2017/18 as his fee will be amortised for a full year.

All of the amortisation fees for the whole squad are added together and included in costs. This came to nearly £24 million for 2016/17. This is far higher than the other clubs in the division.

Profit

Profit, schmofit, fans don’t give a hoot about it, and rightly so. We go to matches to forget about dreary dull work related things, but then some pen pushing dullard invented FFP, and now it impacts upon the game and the team we love.

There are lots of types of profit, so we will whizz through them to reveal the good, the bad and the ugly issues in relation to Villa’s accounts.

Bear in mind the FFP loss limit in the Championship is £39 million over 3 seasons starting in 2016/17, so the target is broadly £13 million per season.

Operating profit

This is club’s income less the day to day running costs. In the case of Villa, this was £14.5 million in 2016/17, which is £278,000 a week. This is far better than the previous season, when the figure was a buttock clenching £88.3 million.

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Villa’s operating losses for the last six years total £208 million. Whilst it appears anecdotally there’s not a lot of love for former owner, the splendidly named Randy Lerner, he was underwriting the majority of these losses.

The £14.5 million is broadly in line with the FFP limit for one season, so it looks as if Villa are without too many worries…but

  1. Remember Villa were in receipt of parachute payments, which will drop from £41 million in 2016/17 to £33 million in 2018/19, and then £14 million in 2019/20.
  2. The loss is after taking into account gains on player sales. Villa were active in the transfer market and sold the likes of Gueye, Traore, Gestede, Clark, Ayew, Westwood and Sinclair for a profit of £26.6 million. It’s unlikely that they will be able to generate such profits year in year out.

As can be seen from the above, gains on player sales are difficult to predict and are very erratic, and never guaranteed.

  1. The 2015/16 accounts were distorted by the dark arts of accounting, when the club effectively booked a number of costs early. Without wanting to make making this tedious elegy even more tedious, they wrote down the value of Villa Park and the squad by £82 million. This had the effect of reducing costs in 2016/17 and beyond.

EBIT

If we add back the gain on player sales and adjust for one off distortions such as those above, we get something called Earnings Before Interest and Tax (EBIT). EBIT is seen as a better indicator of profit, as it focuses on sustainable/recurring income and costs.

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Villa’s EBIT losses don’t make for good reading though, and show just how important player sales are to make ends meet.

EBITDA

If we are going to exclude player sales from our calculation of profit, it makes sense to also exclude the cost of players signed in the profit and loss account too. If we add back player amortisation, and also the infrastructure costs of depreciating the stadium and training facilities etc, every year, we get Earnings Before Interest and Tax (EBITDA). Eagle eyed Villa fans may see the club refer to this in its alarmingly brief review of the business in the annual report.

EBITDA is the flavour of the month for many analysts, as it focuses on sustainable profits and excluded non-cash items such as player amortisation too. As such it is seen as the ‘purest’ measure of profit/loss by many who do this nonsense for a living.

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The good news for Villa is that EBITDA losses were down in 2016/17 compared to the previous season. The bad news is that the losses are still significant at £14.4 million.

FFP FFS

All of the above nonsense is fine, but what about FFP? This is calculated in a different manner to the accountants, and some costs deemed to be ‘good’ such as infrastructure, academy and community schemes are excluded.

The accounts don’t show FFP profit, but we’ve spend a bit of time trawling through the small print, and the news is good for Villa.

£’m
Accounting loss pre-tax (14.5)
Infrastructure 2.9
Community developement 2.0
Youth development 5.9
FFP loss (3.7)

It therefore seems that Villa were well within the FFP limit last season, which does give Steve Bruce some wiggle room, at least until parachute payments disappear, or the club is promoted before that happens.

Player activity

One of the accusations levelled at Randy Lerner was that he didn’t spend enough money in the transfer market. A look at Villa’s transfer activity over the last few years shows the following

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The sums spent by Lerner were fairly modest by Premier League standards, but remember we was also underwriting the trading losses we’ve seen above at the same time.

Tony Xia spent a record amount of £88 million last season, the highest by any club in the history of the Championship. Spending money is one thing, spending it wisely is another.

Brighton and Huddersfield were promoted on the back of fairly modest signings, and Villa fans will point to a number of turkeys that joined the club, which contributed to the final league position of 13th.

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More worryingly, those signings come with hefty wage packets for a number of years, so getting rid of players on good contracts can be a challenge, as Birmingham City know with Nicola Zigic, who stank out St. Andrews on £50,000 a week in the Championship for a number of years. Villa would appear to have a similar issue with Ross McCormack, whose main contribution last season, on the back of his £12 million transfer from Fulham, was in keeping the local Deliveroo rider busy with regular orders from Greggs.

Steve Bruce has been unable to replicate the same level of expenditure in 2017/18, as the club is wary of FFP. A nosey into the small print of the accounts shows that the club only spent £2.9 million on players in the current transfer year, and sold others for £22.4 million.

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Summary

Villa went for broke financially in 2016/17, and it didn’t work out very well. They’ve had to cut back significantly during the present season, but do have the benefits of signing some decent players in the past who have discovered the form that made them so expensive in the first place. A return to the Premier League this season is essential, given the significant reduction in parachute payments that the club faces in 2018/19.

Data Set

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Chelsea: Suffer Little Childreni

Introduction: Oh Manchester, so much to answer for…

Chelsea announced their financial results recently, and since then manager Antonio Conte has been muttering about not being able to compete in the football transfer and wages markets with the two big Manchester clubs. Is this true, and what are the state of Chelsea’s finances? Time to take a peek.

On the face of it, being Premier League Champions in 2017, progress through the group stages of the Champions League, semi-finalists in the League Cup and presently in the FA Cup, you would think there would be plenty to cheer about.

Income

Clubs have three sources of income. In 2016/17 Chelsea’s total income rose by 9.8% to £361 million, which is impressive given the club did not have the benefit of qualifying for European competition. As always, the devil is in the detail.

The increase in income of £32 million is behind that of both United (£66 million) and City (£82 million). Even Arsenal managed an increase of £70 million. So, it appears that Chelsea are struggling to keep up with the other ‘big’ clubs (Liverpool have yet to announce their results, and Spurs, who have not won the title in over 50 years, don’t really compete with the clubs already mentioned financially).

If we extend this growth comparisons over five years, Conte’s comments appear to have greater validity.

Clubs generate income from three sources, matchday, broadcast and commercial, so how have Chelsea performed?

Matchday

After four years of static matchday income, due to Stamford Bridge being at capacity every match and no price increases, there was a 9.4% fall in 2016/17. This was due to a lack of European competition, which usually would generate a minimum of three home matches.

At £65m, Chelsea’s matchday income is the third highest in the Premier League, but may have been overtaken by Liverpool (who had £62m in 2016). The gap between Chelsea and the two clubs above them shows the urgent need for a new stadium with increased capacity. If the rumours are true and the stadium will have 28% of seats sold to the prawn sandwich brigade this could catapult Chelsea easily into the £100 million a season club for this type of income.

Broadcasting

Broadcasting income was up 14% and tops £150m for the first time. This is due to the impact of the new domestic TV deal with BT/Sky. Chelsea’s UEFA TV monies were €69 million the previous season when the club was eliminated in the last 16. They should make at least that sum this season, as they earn extra due to being English Champions, although, due to the complicated formula used to determine UEFA payouts, will be hoping that the other English clubs are knocked out of the competition as quickly as possible.

The failure to qualify for Europe in 2016/17 put Chelsea at a £30-40 million disadvantage, enough to cover Alexei Sanchez’s wages and amortisation cost in the profit and loss account for a year.

Commercial

Chelsea’s commercial income grew by a solid 14% to £133 million. This seems good enough, but it pales compared to the peer group mentioned by Conte.

Whilst Chelsea have done well to increase their income by over £50 million in five years, they started off far behind United and City, and have fallen further behind. All clubs struggle to compete with United for sponsor appeal.

Intuitively Chelsea might expect their commercial income to be on a par with that of City. The reason why it is not normally elicits a call to the North London branch of The Samaritans from a man with a French accent, muttering something about ‘financial doping’.

This issue has implications for financial fair play too, as clubs are limited a £7 million increase in wages each year, plus any money generated by matchday, commercial income and gains on player sales.

Chelsea managed to extend their sponsorship income in 2016/17 by finding a separate sponsor for their training kit, a trick first spotted by Manchester United a few seasons ago.

The club may have had penalty clauses activated by some sponsors, and will have lost out in terms of perimeter advertising, due to the lack of European football.

Costs

The main costs for a club are player wages and player amortisation (transfer fee costs spread over the life of the contract).

Wage costs fell for Chelsea in 2016/17. The club will have had to pay out win bonuses for lifting the Premier League trophy, but against that there will have been no match fees for Champions League fixtures, and some big earners (such as Mourinho J.) were no longer on the payroll.

Wage control in most industries is usually applauded, but football is not most industries. In the rarefied market for elite players, wages usually rise every time there is a new TV deal, as the Alan Sugar ‘prune juice’ impact is applied, Chelsea’s figures are at odds with this viewpoint.

Other clubs have increased their wages over the last five years. Chelsea were on a par with both Manchester United and Arsenal five years ago, but United have spent big, as shown the sums they have paid to the likes of Ibrahomovic, Pogba and Sanchez. United’s wage bill has increased by nearly £80 million over this period compared to just £43 million for Chelsea.

The other cost is that of amortisation, which is how a club expenses players signed in the profit and loss account. When N’Golo Kante signed for Chelsea in summer 2016 from Leicester for £30 million on a five-year contract, this works out as an amortisation cost of £6 million (30/5) per year. Chelsea’s total amortisation charge for the whole squad in 2016/17 was just under £90 million, an increase of 25% on the previous season. It’s high by Premier League standards (the average was £35 million in 2016), but significantly lower than the Manchester clubs.

Adding both wages and amortisation together gives the total football player cost for the season.

United and City are neck and neck, Chelsea are about £75 million a season behind.

One common metric used to look at the effectiveness of player cost control is to compare wages (or wages and amortisation) as a percentage of total income. The lower the percentage,  the more effective the control, and the greater the scope for future investment in players.

The above reveal that Chelsea presently have the poorest wage control of its peer group, and Manchester United, as resented as they are by fans of other clubs, run the tightest ship. If you factor in what United have paid to banks over the years in interest payments though, it’s advantage over the other clubs is eroded.

Profit

Profit is an abstract concept, in theory it should simply be income less costs. In practice there are a range of profits quoted, depending on which costs are included.

Chelsea in their press release stated a profit of £15.3 million for 2016/17. This is however after considering gains on player disposals, including that of Oscar. These gains totalled £69.2 million.

Whilst we expect to see clubs making a profit on player sales each year due to the way player signings are treated in the accounts, this figure is volatile as it depends on individual player disposals.

Excluding player disposals, Chelsea’s EBIT (which is ‘recurring’ profit before interest and tax) was a loss of £53.4 million, slightly higher than £46.2 million the previous season.

Adding back the non-cash expenses in the form of depreciation and amortisation gives an EBITDA profit of £46 million, which is over 30% higher that the previous year’s £35.1m.

Comparing to the peer group, United made an EBITDA profit of £200m, City £105 million and Arsenal £145m, reflecting that Chelsea are weaker than the other elite clubs in this regard.

All the elite clubs are well within FFP limits.

Player activity

Chelsea spent over £100 million on players in 2016/17, including Kante, Luiz, Batshuayi and Alonso. This is a major investment but isn’t keeping up with the noisy Mancunian (or as my mum likes to call them, Manchurian) neighbours at the top of the Premier League, it was even less than Arsenal spent in the same season.

In terms of disposals, Chelsea sold players for £98 million, to give a net spend for 2016/17 of £8m.

Hidden in the footnotes to the Chelsea accounts are a couple of interesting figures (interesting only to those who are still reading this tedious summary we suspect). The first is contingent liabilities.

This is the sum the club must pay to players and former clubs if certain achievements (appearances, trophies, international caps etc.) are met. This was £3 million and compares to £111 million for Manchester City and £45 million for United at the end of June 2017.

This suggests that Chelsea have a different approach to the two Manchester clubs when signing players, aiming for a set fee with little based on future performance.

Chelsea had a spending spree in Summer 2017, mainly on signing Morata, Bakayoko, Drinkwater, Rudiger and Zappacosta for £212 million, which suggests that Antonio Conte’s comments were perhaps wide of the mark. A number of players left the club too, bringing in £63 million.

Summary

Roman Abramovic these days seems to want to make Chelsea break even financially, but that will be insufficient if he also wants to win trophies such as the Premier and Champions League.

The proposed stadium is essential if Chelsea are going to compete in terms of income against the two Manchester clubs, but its going to be a few years before the constraints of playing at Stamford Bridge are overcome.

Conte’s comments (which are echoed to a degree by Arsene Wenger) do appear valid. Chelsea cannot compete with the two Manchester clubs as they cannot match them in terms of income, which in terms gives the ability to pay wages and sign players…unless Abramovic decides to pursue a more expansive strategy. He’s already sunk over a billion into the club, but it may take almost as much again to fund a new stadium.

Data Set

Millwall financial results 2017: Our House

Introduction:

I like Millwall for many reasons. I was born in Southwark, so they were the nearest club to me as a kid. My Uncle Tom had trials for them in the early 50’s. My Uncle Terry, who taught me how to play football, love the game and hate Crystal Palace, supported them for over 60 years. Add to that the Danny Baker factor (and ignoring that Rod Liddle is a CJTC) and there’s a lot of positives.

2016/17 was a successful year in League One, with the club returning to the Championship via the playoffs, and there was some success in the FA Cup too, reaching the quarter final stage.

Off the pitch things were not so good. Lewisham council’s behaviour in trying to arrange a compulsory purchase order for land occupied by the club led to accusations of skulduggery and whitewash by fans.

https://www.standard.co.uk/sport/football/millwall-shock-as-inquiry-clears-lewisham-council-of-wrongdoing-over-plans-to-seize-den-land-a3703911.html

At present there’s no guarantee about where the club will be playing its fixtures in the medium term if the land is sold to property developers.

Key financial figures for 2016/17:

Income £10.0 million (up 20.5%).

Wages £9.4 million (up 17.3%)

Losses before player sales £5.5 million (down 5.5%)

Player signings £923,000

Player sales £514,000

Debts £18.1 million (no major change)

Millwall’s set up is tricky to follow. Millwall Football Club Limited are owned by Millwall Holdings plc, who are owned by Chestnut Hill Ventures (CHV) LLC, based in the USA.

CHV is controlled by American businessman John Berylson, who sued Steve ‘Shagger’ Norris successfully for libel last year in relation to Millwall related issues, and therefore, for the benefit of any doubt, we think that John Berylson is a very very nice man, who helps little old ladies cross the road, and likes puppies.

Income:

All clubs generate money from three sources, matchday, broadcasting and commercial. Being stuck in League One for the last two seasons has had a detrimental impact on Millwall’s finances.

Matchday income rose by just over 20%, reflecting Millwall’s success in reaching Wembley for the playoff final, as well as a lucrative FA Cup match against Spurs. We would expect matchday income to at least hold steady in 2017/18 due to the number of clubs in the Championship with large away followings.

Relegation from the Championship in 2015 significantly reduced Millwall’s broadcasting income.

In terms of boradcasting income, EFL clubs generate cash from two sources.

‘Solidarity’ payments from the Premier League (EPL) are from the £5.1 billion domestic TV deal with BT and Sky. This is given as a fixed percentage of the deal, and works out as about £645,000 for each League 1 club. Promotion to the Championship will result in a significant increase to Millwall of £4.3 million for 2017/18.

In addition, the EFL has its own TV deal with Sky, but this generates only £88 million per season to be split between the 72 EFL clubs, skewed towards clubs in the Championship. This will also benefit Millwall in 2017/18.

If matches are broadcast live, Millwall will earn £100,000 for each home game and £10,000 for every away game broadcast live on Sky. In a division featuring clubs such as Leeds, Villa, Sunderland, Wolves, Millwall are unlikely to be a first pick for the broadcasters unless they are playing one of the bigger clubs, who can generate decent TV ratings for Sky.

Millwall will have to compete with clubs who have been relegated from the EPL and receive parachute payments. These dwarf income from other sources.

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Other income, mainly commercial and retail, has been broadly constant over the last five years.

We anticipate that Millwall be towards the bottom of the income table for 2017/18 for Championship clubs, based on the latest figures we have for other clubs in the division.

Costs:

The main costs for a club are in relation to players, and come in the form of wages and player amortisation.

Wages rose by 17% to £9.4 million. The only other clubs we have figures for from League One last season to date are Sheffield United (promoted) at £10.0 million and Walsall at £3.4 million.

Relegation to League One in 2015 meant that Millwall had to slash the wage bill and offload players on well paid contracts.

This is because  Financial Fair Play operates as a wage cap in League One. Clubs can only pay out 60% of income in terms of playing staff wages (this cap ignores non-player wages).

It is possible for club owners to contribute here if they invest money into the club in the form of new shares, as these are added to the income figure. So, if a club owner invests £1 million into a League One club the playing staff wage budget can be increased by £600,000

The wage/income ratio for Millwall was the lowest for many years at 94%, or to put it in more simple terms, the club paid out £94 in wages for every £100 they generated from revenue. This of course leaves effectively nothing to pay for all the other overheads of the club, such as ground maintenance, heat and light, HR, finance and so on.

The above table also highlights how difficult was for Millwall the last time they were in the Championship, as the wage/income ratio was over 130%.

The Championship is a car crash of a division, with wages averaging 101% of income for 2015/16, despite so many clubs receiving large sums in the form of parachute payments.

We would expect Millwall’s wage bill to rise substantially in 2017/18, but to be still significantly less than those of clubs such as relegated Norwich, who paid out £55.1 million in 2016/17, and promoted Brighton, with £31.3 million plus a further £9 million in promotion bonuses.

We estimate that average wages in the Championship are about £12,000 a week, compared to £2,500 a week in League One. This means that Millwall were probably one of the big payers last season, but that will be reversed in 2017/18.

Millwall’s best hope for promotion is to strike lucky in terms of player recruitment in terms of signings and loan deals for relatively unknown players. The likes of Huddersfield, Wigan, Burnley and Blackpool over the last decade shows that this is achievable.

The other player related expense is that of player amortisation. This is the cost of signing a player spread over the length of his contract. This is how the club deals with player signings, and spreads the cost of a new player over the life of his contract.

So, if Millwall sign a player for £1 million on a four-year contract this works out as £250,000 amortisation a year for four years.

In League One, there are opportunities to sign players for relatively low sums. This is reflected in the amortisation charge being only £0.2 million in 2016/17. The average figure in the Championship is about £6 million.

The advantage of focussing on amortisation instead of just looking at transfer fees is that it removes some of the volatility from making one big signing in a single year.

We would expect the amortisation charge to continue at these levels at least for 2017/18.

Finance costs:

Millwall has debts of about £18 million, and interest is charged on these. Some of the debts are due to the owners at CHV.

The total interest cost was just over £1 million, or £20,000 a week. CHV charges interest at 12% per annum, but appears to have waived this for 2016/17 (and for many previous years too). The accounting for this is complex, and for the present CHV are keeping the club afloat.

Directors pay

Millwall have a moderate policy in relation to director pay compared to League One clubs, but low for the Championship. £164,000 compared to over £190,000 for both Sheffield United and Walsall. In the Championship seven clubs paid over £200,000, and some over a million.

Losses:

Losses are income less costs, and were £5.3 million last season, (£101,000 a week), before considering player sales, which reduced this figure by half a million.

Over the last five years Millwall have lost money each season. Total losses before player sales were £35.4 million, and the highest position during that period was 19th in the Championship.

Player sales reduced these losses by £1.5 million, but it is still a substantial level of commitment required from owner John Berylson (who remember, is a very, very nice man if his lawyers are reading this) to underwrite these losses.

Losses in the Championship are expected to total over £400 million last season. This is only sustainable if owners continue to fund clubs.

Player trading:

Millwall invested a reasonable amount by League One standards last season in pushing for promotion.

The club spent £923,000 on new signings, and sold others for £514,000. Promoted Sheffield United paid out £3.1 million, but fifteen clubs in League One spent less than £100,000 on player additions.

This season in the Championship Millwall be up against clubs with very large player budgets. Last season the relegated clubs splashed out their parachute payments on new players attempting to bounce back to the EPL with Aston Villa (£76 million) Newcastle (£57 million) and Norwich (£20 million) having varying success.

The Owner

John Berylson’s investment increased further in 2016/17 as he invested a further £3 million in the club via a new share issue.

This takes his total investment to just over £56 million, in the form of shares and loans.

Realistically, Berylson will have to subsidise the club by a minimum of £5 million a year for the foreseeable future, unless promotion to the Premier League is achieved. His biggest battle is going to be with the council, and their behaviour in relation to the New Den. Regardless of the team you support, this is one issue around which all fans should unite in campaigning for the club to stay at their present home.

It looks as if Berylson (very nice man) has put a further £4.3 million into the club in December 2017 too, according to documents lodged at Companies House.

Summary

Millwall are in a tricky position. They have the infrastructure to be successful in League One, but as a community club, the owner does not want to compete with some of the big spenders in the Championship, which is understandable.

Continued membership of the Championship is likely to be an expensive exercise, despite the additional income that generates, mainly due to the struggle to compete with higher wages.

The biggest battle awaits with the council, and it’s one match that is essential the club wins.