Interesting post, thanks.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.
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.