18/19 Financial loss of £20.2m

[Smudge]

54 minutes ago, dsr-burnley said:

That's exactly how they depreciate a player - as if he was plant and machinery.  If you sell a player for £60m on 31st May 2019, the full sale proceeds count as income; if you buy a player for £60m on 31st May 2019, the purchase cost will be spread over the next 5 years starting from year ended 2020.  So buy a player for £60m, sell a player for £60m, and you have made £60m profit. 

 

It's the fantasy land of accountants, I'm afraid.  Those of us at the business end tend to think differently from the logical theorists in their ivory towers.

Profit is a two edged sword. To a public company it encourages new or satisfies existing  investment. For a private company it means that you pay more corporate tax

[CUJimmy]

6 hours ago, dsr-burnley said:

That's exactly how they depreciate a player - as if he was plant and machinery.  If you sell a player for £60m on 31st May 2019, the full sale proceeds count as income; if you buy a player for £60m on 31st May 2019, the purchase cost will be spread over the next 5 years starting from year ended 2020.  So buy a player for £60m, sell a player for £60m, and you have made £60m profit. 

 

It's the fantasy land of accountants, I'm afraid.  Those of us at the business end tend to think differently from the logical theorists in their ivory towers.

That is how clubs are meant to do it but not all do.

 

If we buy a player for £50m on a 5 year contract we discount the whole lot over 5 years so £10m a year goes on the P&L.  The principle is that at the end of their contract a player has no value due to Bosman.

 

Derby got in trouble because they put a value on a player at the end of the contract so in my example above they might say that after 5 years the player will still be worth £20m meaning they have only spent £30m.  Discounted over 5 years this is £6m a year on the P&L.

 

I think this is how it works anyway. I am not an accountant but my daughter studied football business as part of her degree so tried to explain it to me.

 

Either way if they played for Derby they must be shit.

 

 

[shailen]

Looking at the accounts it seems as though wages and salaries have increased from £90m to £120m and that seems to be the contributing factor to our loss. 

 

Also I understand players are treated as intangible assets valued at the total value of their contract when they sign it and their value is amortised over their contract length (i. e. written down to zero at the end of the contract due to the bosman rule). This will impact our profit but in reality it is not a cash cost to the business. Cash wise we had £11m in the bank which is quite healthy and this is before we take the Maguire money less Tielemans less Praet transfers into account, as this is the position at May 2019. 

[StriderHiryu]

14 hours ago, stu said:

 

Leicester City Chief Executive Susan Whelan said: “Ten years on from King Power’s takeover in 2010, Leicester City finds itself in a position of strength from which we can all move securely forward with confidence and ambition. During that time, the Club’s supporters have put their faith in King Power’s long-term investment strategy and we aim to continue rewarding that faith with progress, growth and success both on and off the pitch.

 

“We remain a Club of fierce ambition: striving to progress every season; giving ourselves every opportunity to compete more consistently at the elite level of the game; giving amazing experiences to our fans in the stadium and around the world; and making our community proud of its football club. It’s the reason every penny of revenue generated during those 10 years under King Power’s ownership has been reinvested into the Club.

 

“I’m excited to assure our supporters that, even with the considerable progress that has been made in the last 10 years, we’re very confident that the best is yet to come.”

The incredible thing about King Power is that all of the above is true! I also think it's incredibly promising that despite being midway through a transition stage and heavily investing in one off costs like the Training Centre and Stadium Improvements that we are still so competitive. It would be tempting to spend our Champions League windfall on the playing squad, but in going for the new training centre it gives us a huge long term benefit. One that will help us for the next 20-30 years, if not more. 

 

We really are setting ourselves up nicely for the future, and it's all so exciting!

[grobyfox1990]

Healthy set of results, revenue has increased by c.20% and commercial revenue doubled! And there is borrowing from KP, which must be as close to rock bottom rates as you can legally get away with in an inter-company agreement. Seems the club is stood in good stead for the future.

[davieG]

https://www.leicestermercury.co.uk/sport/football/football-news/new-leicester-city-accounts-reveal-3909937

 

Leicester city has ramped up investment in its bid to be one of the biggest teams in English football - declaring a £20m pre-tax loss as a result.

The club, currently third in the league, five points clear of chasers Chelsea, has revealed the extent of the money it is ploughing into its playing squad, its management, the new training ground near Loughborough – and the plans to add thousands more seats to the King Power Stadium.

Newly published accounts show club revenues were up £20 million last season, reaching £178.4 million.

Leicester made a pre-tax loss of £20 million for the year though – which compares to the £92.5 million profit it made two years earlier when reaching the quarter-finals of the Champions League generated £70 million.

The multi-million pound loss was put down to factors such as the £8.8 million it spent bringing Brendan Rodgers and his backroom staff to the club from Celtic in February 2019, and paying off outgoing manager Claude Puel.

Leicester also reported a £30.5 million increase in staff costs for the year – due to investment in the squad and management team.

On top of that, the club put more than £13 million into the cost of the new training ground at Seagrave, near Loughborough, during the period.

The new £100 million training ground facility – designed and built by the same people who put up the new Spurs training ground – is expected to be ready for pre-season training in four month's time.

And since May, the club has invested a further £41 million in the new training ground – backed by a six-year loan from parent company King Power lnternational – as well as £2.6 million on drawing up its plans to expand the King Power Stadium from its 32,000 capacity to more than 40,000 seats.

Despite the losses, Leicestershire Live has been told LCFC are not in danger of breaching UEFA’s Financial Fair Play rules, designed to ensure clubs don’t overspend on players.

And should City – currently third in the league, five points clear of Chelsea – qualify to play in the Champions League next season, they will get at least £15 million, which could be up to £50 million if they were to make the quarter finals.

Revenues from reaching the Europa League would be a lot less.

Riyad Mahrez joined Manchester City from Leicester City for £60m in 2018

The club saw a big rise in revenues from its sponsorship and other commercial income last season – areas which will play a key part in growing profits in the years to come. Those revenues grew from £14 million to £26 million.

Writing in the accounts, club chief executive Susan Whelan said the year was defined by challenging events, including the death of chairman Vichai Srivaddhanaprabha in a helicopter crash next to the city stadium in October 2018.

She said: “These events however have strengthened the deep commitment of the club, its directors and shareholders to honour the legacy of the late chairman by pushing forward the sustainable long-term development of the club.

“Investment continues both into the football squad and management team and into the off pitch infrastructure and management including the continuing construction of its new industry-leading training ground which is expected to complete summer 2020.”

Leicester City spent £1.1 million in the aftermath of the tragedy on things such as crisis management, security and travel arrangements.

The accounts for the year to May 31, 2019, show the club spent £119 million on seven new players in the period, including James Maddison, Ricardo Pereira and Çağlar Söyüncü.

The club put a market value of £481.6 million on the 56-strong squad – more than £130 million up on the previous year.

The 18/19 accounts show LCFC made a profit of more than £58 million on the sale of Riyad Mahrez to Manchester City and Ahmed Musa to Al-Nassr in Saudi Arabia.

Harry Maguire’s sale to Manchester United for a reported £80 million in August will help the balance sheet for the current season.

The annual report for last year valued the existing Belvoir Road training ground, two miles south of the King Power Stadium, at £6.7 million. It is understood there are no imminent plans to sell the land.

Last season was the tenth under the ownership of the Srivaddhanaprabha family, Thai owners of the King Power group of companies.

The club said promotion to the Premier League in 2014 has seen turnover increase on average by almost 20 per cent each year – not including the extraordinary Champions League season.

Susan Whelan said: “Ten years on from King Power’s takeover in 2010, Leicester City finds itself in a position of strength from which we can all move securely forward with confidence and ambition.

“During that time, the club’s supporters have put their faith in King Power’s long-term investment strategy and we aim to continue rewarding that faith with progress, growth and success both on and off the pitch.

“We remain a club of fierce ambition: striving to progress every season; giving ourselves every opportunity to compete more consistently at the elite level of the game; giving amazing experiences to our fans in the stadium and around the world; and making our community proud of its football club.

“It’s the reason every penny of revenue generated during those 10 years under King Power’s ownership has been reinvested into the club.

“I’m excited to assure our supporters that, even with the considerable progress that has been made in the last 10 years, we’re very confident that the best is yet to come.”

[Gerard]

10 hours ago, Lambert09 said:

Urgh, I was happy forgetting we’d paid actual money for Ghezal

 

They must love us at Monaco. 

 

They sell us their unwanted players for £50m and we loan them our unwanted players who cost us £50m.

[urban.spaceman]

Accounts are now available on Companies House for everyone to peruse:

 

https://beta.companieshouse.gov.uk/company/04593477/filing-history

 

Look out on Twitter for Kieran Maguire/'Price Of Football' and Swiss Ramble, who are very good at analysing this sort of thing.

[urban.spaceman]

https://mobile.twitter.com/KieranMaguire

[Simoken]

The club have made great investment for the future, dont worry. If you were to see no infrastructure/facilitiy/recruitments/on-field improvements and a slopping revenue then thats a concern but its not. See profit margins to increase in the next years. #lookinggood

[Guest ttfn]

4 minutes ago, urban.spaceman said:

https://mobile.twitter.com/KieranMaguire

This explains it pretty well.

 

The wages have gone up significantly as somebody said on the first page, I’m surprised by how much but I suppose that’s football nowadays.
 

The only slight cause for concern is that it does suggest that if we are to be self-sufficient we are reliant (for now) on making at least one big sale every year. Having a (full) bigger stadium will help to close that gap but I struggle to see it making a hugely material difference - we’re running at a c.£20m operating loss (excluding transfers) and the total match day income is only £15m-ish on a 32k stadium.

[Fox in the North]

11 minutes ago, ttfn said:

This explains it pretty well.

 

The wages have gone up significantly as somebody said on the first page, I’m surprised by how much but I suppose that’s football nowadays.
 

The only slight cause for concern is that it does suggest that if we are to be self-sufficient we are reliant (for now) on making at least one big sale every year. Having a (full) bigger stadium will help to close that gap but I struggle to see it making a hugely material difference - we’re running at a c.£20m operating loss (excluding transfers) and the total match day income is only £15m-ish on a 32k stadium.

I think the corporate side of the expansion will play a big part, the additional corporate facilities and the potential hotel and arena will all provide additional areas of income that weren’t available before.

 

I’d imagine that sponsorship would also go up for these additional features too.

[urban.spaceman]

12 minutes ago, ttfn said:

This explains it pretty well.

 

The wages have gone up significantly as somebody said on the first page, I’m surprised by how much but I suppose that’s football nowadays.
 

The only slight cause for concern is that it does suggest that if we are to be self-sufficient we are reliant (for now) on making at least one big sale every year. Having a (full) bigger stadium will help to close that gap but I struggle to see it making a hugely material difference - we’re running at a c.£20m operating loss (excluding transfers) and the total match day income is only £15m-ish on a 32k stadium.

This was still within the restrictions of STCC (Short Term Cost Control), which prevented a rise in wage spending of more than 7% of the previous year. STCC was lifted last summer so expect an even bigger rise from now on. As long as it's sustainable and within the rules I trust the club completely to handle it. All hail Rudders.

 

A stadium expansion would represent a huge income boost mainly from hospitality. Especially if we have regular Champions League football to offer too.

[urban.spaceman]

3 minutes ago, Fox in the North said:

I think the corporate side of the expansion will play a big part, the additional corporate facilities and the potential hotel and arena will all provide additional areas of income that weren’t available before.

 

I’d imagine that sponsorship would also go up for these additional features too.

Forgot about the arena and hotel! They'd be massive for us. Especially if the music venue can double as an ice rink for a Leicester City Ice Kings Ice Hockey team (one can dream). Imagine the stadium being part of the summer arena tour circuit for bigger bands too - it would be lucrative for a club like us.

[Guest ttfn]

19 minutes ago, Fox in the North said:

I think the corporate side of the expansion will play a big part, the additional corporate facilities and the potential hotel and arena will all provide additional areas of income that weren’t available before.

 

I’d imagine that sponsorship would also go up for these additional features too.

You’d have thought so, but it’s got to go up a lot to cover the shortfall.

 

There’s only so much you can tell from a set of accounts published 9 months after the year end and I’m sure they know what they’re doing. But on the face of it, if we’re to believe the club’s commitment to self-sufficiency, we shouldn’t be thinking that we’re going to be in a position to hold on to our best players.

Edited 4 March 2020 by ttfn

[Jon the Hat]

13 hours ago, The Syrup said:

Could the loans from KP be interest-free, or low interest rates just to cover admin costs. Its essentially cash moving between different parts of the KP organisation after all, if you can do some creative accounting and avoid borrowing from the usual sources then why not.

 

I'm no accountant so WTF do I know.

There are rules (transfer pricing) around using commerical arms length rates for intercompany transactions - including loans to avoid just that - moving profit from one tax jurisdiction to another.

[st albans fox]

12 minutes ago, ttfn said:

This explains it pretty well.

 

The wages have gone up significantly as somebody said on the first page, I’m surprised by how much but I suppose that’s football nowadays.
 

The only slight cause for concern is that it does suggest that if we are to be self-sufficient we are reliant (for now) on making at least one big sale every year. Having a (full) bigger stadium will help to close that gap but I struggle to see it making a hugely material difference - we’re running at a c.£20m operating loss (excluding transfers) and the total match day income is only £15m-ish on a 32k stadium.

Not sure that we have to make a big sale every summer but we certainly can’t be spending much more than 25m nett on our transfer dealings over the three year cycle  ...... teams like Everton for comparison - their nett spend is way higher than that 

[UHDrive]

4 hours ago, StriderHiryu said:

The incredible thing about King Power is that all of the above is true! I also think it's incredibly promising that despite being midway through a transition stage and heavily investing in one off costs like the Training Centre and Stadium Improvements that we are still so competitive. It would be tempting to spend our Champions League windfall on the playing squad, but in going for the new training centre it gives us a huge long term benefit. One that will help us for the next 20-30 years, if not more. 

 

We really are setting ourselves up nicely for the future, and it's all so exciting!

I'm a novice in this area so I'm simply wanting to ask a question. Does the CL remain unspent that we earnt? And I thought the stadium/training ground were cash injections from the owners? Like I said just curious, if I'm asking dumbass questions please say! 🙈

[dsr-burnley]

13 minutes ago, UHDrive said:

I'm a novice in this area so I'm simply wanting to ask a question. Does the CL remain unspent that we earnt? And I thought the stadium/training ground were cash injections from the owners? Like I said just curious, if I'm asking dumbass questions please say! 🙈

Debtors plus cash owned by the company = £115m.

Creditors owed by the company = £234m.

 

Net shortfall if all debtors and creditors had to be paid tomorrow = £119m, but obviously that won't happen.  If it did you have the ground, the training ground(s), and of course the players to sell.  Or get some more cash off the owners.

 

2018 - Income £160m, wages £119m, Admin and matchday expenses £26m, interest paid £3m, operating profit £12m.  Players sold for £42m, players bought for £93m.

2019 - Income £181m, wages £150m, Admin and matchday expenses £40m, interest paid £6m, operating loss £15m.  Players sold for £80m, players bought for £119m.

[Muzzy_Larsson]

6 hours ago, CUJimmy said:

That is how clubs are meant to do it but not all do.

 

If we buy a player for £50m on a 5 year contract we discount the whole lot over 5 years so £10m a year goes on the P&L.  The principle is that at the end of their contract a player has no value due to Bosman.

 

Derby got in trouble because they put a value on a player at the end of the contract so in my example above they might say that after 5 years the player will still be worth £20m meaning they have only spent £30m.  Discounted over 5 years this is £6m a year on the P&L.

 

I think this is how it works anyway. I am not an accountant but my daughter studied football business as part of her degree so tried to explain it to me.

 

Either way if they played for Derby they must be shit.

 

 

This is correct, asset amortisation it's called I'm sure.

[Muzzy_Larsson]

1 hour ago, ttfn said:

This explains it pretty well.

 

The wages have gone up significantly as somebody said on the first page, I’m surprised by how much but I suppose that’s football nowadays.
 

The only slight cause for concern is that it does suggest that if we are to be self-sufficient we are reliant (for now) on making at least one big sale every year. Having a (full) bigger stadium will help to close that gap but I struggle to see it making a hugely material difference - we’re running at a c.£20m operating loss (excluding transfers) and the total match day income is only £15m-ish on a 32k stadium.

I guess regular European football could offset any need to sign a player.

 

That's how it generally works at Celtic, we qualify for the CL then we don't have to sell anyone, we don't then a big player usually gets sold.  That's what they tell us anyway despite the fact we haven't qualified in two years and our most recent results show us having £40m sitting in the bank.

[themightyfin]

Consider it cost just over £6.2 million to get rid of CP and almost £10 million to bring in BR add to that expences incured and legal fees and there alone is your £20million so we ain't dont that bad considering.  

[UHDrive]

5 minutes ago, dsr-burnley said:

Debtors plus cash owned by the company = £115m.

Creditors owed by the company = £234m.

 

Net shortfall if all debtors and creditors had to be paid tomorrow = £119m, but obviously that won't happen.  If it did you have the ground, the training ground(s), and of course the players to sell.  Or get some more cash off the owners.

 

2018 - Income £160m, wages £119m, Admin and matchday expenses £26m, interest paid £3m, operating profit £12m.  Players sold for £42m, players bought for £93m.

2019 - Income £181m, wages £150m, Admin and matchday expenses £40m, interest paid £6m, operating loss £15m.  Players sold for £80m, players bought for £119m.

Thanks, really appreciate that. Makes me wonder whether this trend of bigger club = higher salaries will continue. I didn't realise just how much by, although I'm glad the club aren't restraining themselves like Southampton/Tottenham caps. I hope we'll be better off with a lot of players due to leave this summer and next to give some room for further player investment.

[Wymsey]

But, compare that to Aston Villa's latest results..

https://www.bbc.co.uk/sport/football/51738406

[StriderHiryu]

52 minutes ago, UHDrive said:

I'm a novice in this area so I'm simply wanting to ask a question. Does the CL remain unspent that we earnt? And I thought the stadium/training ground were cash injections from the owners? Like I said just curious, if I'm asking dumbass questions please say! 🙈

No I believe it was spent on the training ground, as has a lot of the Mahrez and even Maguire money. I stand to be corrected, but I believe we under-spent somewhat on players for a few seasons to get these two infrastructure improvements in place. 

 

I wouldn't be surprised if 2-3 seasons from now we spend quite a bit on players, a bit like Spurs did after not signing anyone during the season their new ground opened.