FFP

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zigzag
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Re: FFP

Post by zigzag »

isrodger wrote: The maximum loss limit is now £13m per Championship season - the owner is free to supplement the club’s income up to this level.

Losses are assessed over three seasons, therefore a loss in season 3 of £50m can be offset/by a profit of £11m in years 1 & 2.

Some expenditure (Youth development, Women’s Football spend) is excluded from the calculation, as is capital expenditure (ground development).

Clubs relegated from the Premier League are allowed to make losses of up to £35m in respect of any season spent in the top flight.

In the 2016/17 season we made a profit of £1m, last season we lost £4m therefore permissible losses for the next 2 seasons are a combined £35m.

Now for the confusing bit....

Transfer fees are also counted, although they are broken down and spread - “amortised” - over the life of a contract and so can be structured shrewdly to minimise their FFP impact.

For example, when we sign Costa next year for £15m on a five year contract the fee will be amortised at the rate of £3m a year. At the end of a player's contract, their 'book value' will therefore be zero.

The amount amortised each year is counted as a 'cost' in the club's FFP calculations.

The cash outlay / income for a player varies from how the the fee is accounted for in the P&L.

We spent £28m in transfer fees in 2017/18 assuming the average contract was 3 years the spend will hit the P&L at £9m per annum for 3 years. The income of from sale of Wood & Taylor etc of circa £27m was accounted for in full that year. Hence a profit on transfers of £18m that year.

Last summer ignoring loan fees (which are direct costs that year) in cash terms we broke even in the transfer market the sale of Viera, Antonsson etc paying for Douglas and Bamford. The £10m income would hit the P&L immediately however the £10m expenditure would hit the P&l @ circa £2.5m per annum for 4 years.

This summer we have paid £250k to Carlisle, and collected £9m Clarke, £4m Jansson, £2.5m Saiz, Ekuban £1m circa £2m Halme, Wilks, Dalby etc. The majority of that revenue will hit the P&L as profit.

In 2017/18 Radz effectively made a owners contribution of £11m with the introduction of the 49rs money. He’s made no such contribution last season or this season to date.

It would be safe to say Radz probably takes a £1m in expenses out of the club per annum. Lufc or Eleven sports pay his Net Jets account, prior to 2017/18 he did not take a salary.
Interesting post, thanks.

A couple of questions if I may,
i) are the profits/losses of 2016-17 £+1m 2017-18 £-4m inclusive of the transfer fees in/out?
ii) as above but inclusive of the £11m 49ers money?

For now Im going to assume i - yes and ii - no, in my claculations here. Now it would be clearer to set this out on a spreadsheet but here goes in forum style.....

....Assuming that profits/losses are inclusive of transfer fees we still have quite a bit of headroom before hitting FFP rules, +1m-4m= -3m+39m(FFP limit) = 36m allowable loss remaining for 2018-19, add onto that £11m owners input (the 49ers money) and we could have allowable losses in the 2018-19 year just gone of £47m and we would still be within the £39m FFP cap.

This figure doesnt change much if roll forward a year and drop 2016-17 from the calculation and include current year 2019-20 (something like £-4m+£11m = £+7m, giving allowable losses over the 2 years 2018-19 & 2019-20 of c£46m).

On the above calculations we would be looking at substantial losses in 2018-19 to be getting close to troubling ourselves with FFP. Therefore Im not sure that FFP is the overriding factor in our apparent cautiousness in the transfer market, I feel that this may be a bit of smoke & mirors from the club and to me it looks more like AR has a lack of funds and/or cash flow issue.

Now, AR is an astute businessman, who I think will sell the club in the next few years, but he doesnt want to sell now as he would rather hope to gain substantially more by selling should we achieve PL status, I also think he wants to maximise his return by not diluting his stake any further at this time.

The problem, for me, is that due to this lack of funds/cashflow problem AR is unable to invest as required, we had a good opportunity in January with James which went wrong seemingly due to money issues, we have had another opportunity this summer and possibly havent invested as much as many fans would like.

We have a short window with MB at the helm, and it maybe that he doesnt want any more players I dont know, but as a club we need to strike whilst the iron is hot, Im not sure we are doing that, which I think is stemming from the owners financial position (he simply doesnt have as deep pockets as some other owners, and its no good saying we could get creative with the accounts as per Derby/Villa if the owner doesnt have the cash to pump in to the club in order to get creative with).

The problem for AR is that although he seeks to maximise his return on promotion to the PL if he doesnt invest now he may not get the the PL in order to maximise that investment. I suspect he knows that and wishes he had deeper pockets but currently his hands may be tied by a lack of funds and the club are saying they are worried by FFP as a bit of a smokescreen as until ISRs excellent post above I didnt understand the full in & outs of FFP.
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Another Northern Soul
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Re: FFP

Post by Another Northern Soul »

I understand/appreciate the 'smokescreen' insinuation and I must admit to sometimes thinking the same when in more sceptical mood. However, speaking to more-informed people than myself I believe there is strong feeling that all the clubs in the Champ are very wary of the FFP rules as a result of Birmingham's punishment last season. The spending does seem to be more cautious in general so far, unless I'm imagining it.

i'm worried that some Prem club will feel the need to take a punt on Kalvin and offer a fee which the club feels it can't turn down. Looking forward to the season AND the closure of the transfer window :thumbup:
isrodger
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Re: FFP

Post by isrodger »

To answer Zig Zag .....
i) are the profits/losses of 2016-17 £+1m 2017-18 £-4m inclusive of the transfer fees in/out? NO NOT NECESSARILY PURCHASES WILL HIT THE PROFIT AND LOSS OVER THE TERM OF THE PLAYERS CONTRACT. IN SIMPLE TERMS WE SIGN A STRIKER FOR £20m ON A 1Yr DEAL THE COST THIS YEAR IS £20m; on a 4 yr deal the cost would be £5m this season; and £5m the following 3 seasons. SALES CRYSTALLISE THE YEAR OF SALE. THE PROFIT WE MAKE ON THE SALE DEPENDS ON THE HOW MUCH OF THE PLAYERS PURCHASE PRICE HAS ALREADY HIT THE PROFIT AND LOSS. If we sell the same player who was on a 4yr deal for £20m after 1 season the layers written down value is £15m so we would make a profit in that ear of £5m if we sold in yr 3 the profit would be £15m as the players value would be £5m on the books.

ii) as above but inclusive of the £11m 49ers money? THIS MONEY IS AN OWNERS CONTRIBUTION, EFFECTIVELY ITS RADZ £13m allowance for that financial year. He could have put the money in himself however has diluted his stake and put the 49rs money in instead. He hasn’t put any further Money.
isrodger
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Re: FFP

Post by isrodger »

Just to add a final insight into how conceivably a QSI etc could get round FFP.

Assuming the club is breaking even, and no legacy debt. They could put sell Jack Clarke for £10m (that’s all profit as he has no book value) They can then put their £13m into the club. They now have £23m to play with this financial year. That could fund £100m of signings on 4 year deals £125m on 5 yr deals (obviously this ignores wages) Clearly I simplified to make the point, and they need the cash to purchase the players in the first instance; however this is in part how they were found not guilty as regards a breach of FFP @ PSG when spending £400m or whatever on Mbappe and Neymar.
DominanceUK
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Re: FFP

Post by DominanceUK »

Thanks for the info, ISR but it still seems unclear to me. It appears to me that there are loopholes within the system, and I mean from mainly a European perspective. Are the rules the same? Do they apply to all the teams? I have serious doubts about that. Chelski, RM, Barca and PSG all had, to my knowledge, bans from the transfer window yet no points deduction. Smaller teams throughout Europe had the opposite. This is just my understanding of it without being 100%. Rich get richer, the poorer get poorer and we're ultimately, one step closer, to the Super League that UEFA always wanted. And some wonder why people fall out of love with the sport.
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SCOTTISH LEEDS
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Re: FFP

Post by SCOTTISH LEEDS »

Not sure if this article from the BBC football website will help but it tells you how UEFA, PL and FL rule on FFP:-

It is from early March this year:-

https://www.bbc.co.uk/sport/football/29361839
isrodger
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Re: FFP

Post by isrodger »

DominanceUK wrote:Thanks for the info, ISR but it still seems unclear to me. It appears to me that there are loopholes within the system, and I mean from mainly a European perspective. Are the rules the same? Do they apply to all the teams? I have serious doubts about that. Chelski, RM, Barca and PSG all had, to my knowledge, bans from the transfer window yet no points deduction. Smaller teams throughout Europe had the opposite. This is just my understanding of it without being 100%. Rich get richer, the poorer get poorer and we're ultimately, one step closer, to the Super League that UEFA always wanted. And some wonder why people fall out of love with the sport.
There are different financial parameters for the championship, premiership and uefa competitions, which regulate the level of loss permissible. The bigger clubs have significantly more revenue, therefore are less likely to sustain losses.

The major loopholes, are around sponsorship from related “companies” ie City & PSG having sponsorship deals with their state airlines which might have been in excess of a normal commercial rate (this is highly debatable). Secondly, I would imagine the old favourite of image rights & individual commercial deals might provide potential loopholes. I’m not sure what image right deals Neymar has coming out of Qatar paid into his BVI or Qatar domiciled image rights company ... but you get my drift.
DominanceUK
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Re: FFP

Post by DominanceUK »

isrodger wrote:
DominanceUK wrote:Thanks for the info, ISR but it still seems unclear to me. It appears to me that there are loopholes within the system, and I mean from mainly a European perspective. Are the rules the same? Do they apply to all the teams? I have serious doubts about that. Chelski, RM, Barca and PSG all had, to my knowledge, bans from the transfer window yet no points deduction. Smaller teams throughout Europe had the opposite. This is just my understanding of it without being 100%. Rich get richer, the poorer get poorer and we're ultimately, one step closer, to the Super League that UEFA always wanted. And some wonder why people fall out of love with the sport.
There are different financial parameters for the championship, premiership and uefa competitions, which regulate the level of loss permissible. The bigger clubs have significantly more revenue, therefore are less likely to sustain losses.

The major loopholes, are around sponsorship from related “companies” ie City & PSG having sponsorship deals with their state airlines which might have been in excess of a normal commercial rate (this is highly debatable). Secondly, I would imagine the old favourite of image rights & individual commercial deals might provide potential loopholes. I’m not sure what image right deals Neymar has coming out of Qatar paid into his BVI or Qatar domiciled image rights company ... but you get my drift.
Cheers pal, and thx to you, SL for the link.
EastYorkie
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Re: FFP

Post by EastYorkie »

I think its worth posting to counter some of the misunderstandings that have been posted above.

The timing of what has been described is incorrect.

The FFP rules (actually known as Profitability and Sustainability Rules for the Championship) are such that the clubs have to submit by March of each year the following P&L information.

Using this season as an example, in March 2020 the club will submit:-

P&L statement for 2017/2018 = -£4.3m

P&L statement for 2018/2019 = ? .......... as of now we simply don't know until the accounts are published in April 2020. But it has already been indicated that losses have gone up considerably, partly due to the wage bill having risen by £7m a year according to the club.

Forecasted P&L statement for 2019/2020 = ? ......... again we don't know but we could assume that losses might be similar to 2018/2019 on the basis that not much has changed before we start taking into account player sales and purchases.

So the reality is that none of us can make any decent assumption about where the club stands on FFP looking forwards. Only those people in the know at the club have the information available and you have to leave them to get on with it.

If we guessed that the increase in costs means the club will post a loss of -£10m for 2018/2019, then it could be the same for 2019/2020 and suddenly the club doesn't have as much room for manoeuvre as some might assume. Especially when you consider this rolls on year after year.

What the forecast will look like for 2019/2020 is a big issue and it depends on exactly when the club has committed to pay the £15m for Costa - I'm certainly not aware of anything the club has announced for this. It may fall into the 2019/2020 accounts or it may fall into the following year - it depends on what has been agreed with Wolves. It may also depend on whats best for managing the FFP issues for both Leeds and Wolves.

The other aspect of the forecast for 2019/2020 is what plans the club may have for the Janaury transfer window - again we simply don't know.

The top and bottom of this is that we simply don't know and can't really comment on FFP for LUFC until the next set of accounts are published in April 2020, which is after the January transfer window and we will know how this season is playing out.

Whether we have a billionaire or not in charge makes not a lot of difference as the whole purpose of these rules is to try and prevent seriously rich people gambling with players and clubs, loading them up with debts and then walking off into the sunset leaving the creditors out of pocket and the fans distraught because their once famous club has just been destroyed. These rules are aimed at limiting the damage seriously rich people can do to a club.

Whether Radz is being over cautious, prudent or missing a trick remains to be seen. I don't believe anyone on here truly knows the financial position of the club at this moment in time and is therefor just simplifying matters to make Radz look like a bad owner because that suits there own particular agenda.

Me, I'm keeping out of the bashing Radz debate because I simply don't know yet which way things will fall. Ask me again next April.
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Another Northern Soul
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Re: FFP

Post by Another Northern Soul »

EastYorkie wrote:I think its worth posting to counter some of the misunderstandings that have been posted above.

The timing of what has been described is incorrect.

The FFP rules (actually known as Profitability and Sustainability Rules for the Championship) are such that the clubs have to submit by March of each year the following P&L information.

Using this season as an example, in March 2020 the club will submit:-

P&L statement for 2017/2018 = -£4.3m

P&L statement for 2018/2019 = ? .......... as of now we simply don't know until the accounts are published in April 2020. But it has already been indicated that losses have gone up considerably, partly due to the wage bill having risen by £7m a year according to the club.

Forecasted P&L statement for 2019/2020 = ? ......... again we don't know but we could assume that losses might be similar to 2018/2019 on the basis that not much has changed before we start taking into account player sales and purchases.

So the reality is that none of us can make any decent assumption about where the club stands on FFP looking forwards. Only those people in the know at the club have the information available and you have to leave them to get on with it.

If we guessed that the increase in costs means the club will post a loss of -£10m for 2018/2019, then it could be the same for 2019/2020 and suddenly the club doesn't have as much room for manoeuvre as some might assume. Especially when you consider this rolls on year after year.

What the forecast will look like for 2019/2020 is a big issue and it depends on exactly when the club has committed to pay the £15m for Costa - I'm certainly not aware of anything the club has announced for this. It may fall into the 2019/2020 accounts or it may fall into the following year - it depends on what has been agreed with Wolves. It may also depend on whats best for managing the FFP issues for both Leeds and Wolves.

The other aspect of the forecast for 2019/2020 is what plans the club may have for the Janaury transfer window - again we simply don't know.

The top and bottom of this is that we simply don't know and can't really comment on FFP for LUFC until the next set of accounts are published in April 2020, which is after the January transfer window and we will know how this season is playing out.

Whether we have a billionaire or not in charge makes not a lot of difference as the whole purpose of these rules is to try and prevent seriously rich people gambling with players and clubs, loading them up with debts and then walking off into the sunset leaving the creditors out of pocket and the fans distraught because their once famous club has just been destroyed. These rules are aimed at limiting the damage seriously rich people can do to a club.

Whether Radz is being over cautious, prudent or missing a trick remains to be seen. I don't believe anyone on here truly knows the financial position of the club at this moment in time and is therefor just simplifying matters to make Radz look like a bad owner because that suits there own particular agenda.

Me, I'm keeping out of the bashing Radz debate
because I simply don't know yet which way things will fall. Ask me again next April.
I think that's unfair (the in bold part at the end of your post) and I'm not sure it's reasonable to suggest anyone on here has 'an agenda'. What agenda can a poster/supporters have of any significance? Radrizzani has improved so many aspects of the club but he's far from a perfect owner, he has made some very poor calls. And I've been one of his biggest supporters throughout :thumbup:
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