Financial Results

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.

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.


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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The trainspotter's trainspotter of football finance.

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