The Championship FFP Thread (Merged)

[Mr Popodopolous]

I'd add Sheffield Wednesday to that.

Won't happen I am sure but I'd piss myself (with laughter) if they after all that, had it adjudicated that because they botched the 2017/18 transaction dates and were- a polite way to put it might be flakey albeit assisted by the Football League- had it excluded entirely from the calculations.

Reading the criteria from the Written Reasons released a while back, could there be a small chance??

Edited November 27, 2020 by Mr Popodopolous

[reddoh]

In my stupid world the solution is simple owner states his entire wealth . if he wishes he can waste that on his club but he has to be able to service every debt and loses everything if he fails(I mean everything). No walking away with money back

[Mr Popodopolous]

Escrow account, something like that? Seen it mentioned before.

AFAIK, new owners are supposed to be able to provide proof of funds for the next 2 seasons in any event, but as we've seen at many clubs it's not always the case to say the least...Bury and Dale is the best example but there are many, many more.

Interesting alternative though- abolition of FFP and make it that the owner legally has to be able to service debt and losses- that could be a future method if FFP is deemed outdated.

A further suggestion though this would truly risk a cap on ambition so I see many downsides but could be to oblige clubs to- and I am not talking exceptional events such as Covid- but to compete in the League they have to break even and not just in P&L, in fact that can be misleading at times but cash flow- at best cash flow has to be breakeven, if not positive. Could  hinder clubs who are both ambitious and in a hurry though, albeit not terminally.

Edited November 27, 2020 by Mr Popodopolous

[BTRFTG]

On 27/11/2020 at 22:44, Mr Popodopolous said:

Agreed. It's FRS 102 now though I believe, transition in mid 2010s? 

It's interesting, as I read the report for the Derby case- very long it was too, but quite sure it cited "Depreciated Replacement Cost" as the correct valuation method here. Sheffield Wednesday not so sure, but it mentioned yield so even if it went for £60m, if annual rent is £3m some kind of merit? Rental charge would count against FFP also, even though we all know it's overvalued- surprised the Football League chose not to challenge the valuation, maybe that could still come down the track. What's your thoughts on it potentially being restated to the correct accounts? If there was a way to exclude it verbatim for FFP purposes it'd be good, but might that prove impossible?

Agreed. Specialist assets, with limited value. However from what I read on this, Depreciated Replacement Cost appears to be a good proxy for it- which is why it confuses me so much as to why using this very same method, it rises from say rounding up £24m in 2014, to £60m in 2018 or 2019! 2014 accounts are worth a read, they seem to state it inclusive of land under the DRC. Might have been yield related for sale price though, £60m price/£3m rent.

Talking of rent, Pride Park appears to be annually £1.1m or £1.3m or something, for an £81.1m transaction- the Report showed much difference ie £4m or more a year BUT they invoked a clause on days that it would only be used for football related activities. Which knocked between £2.5-3m off it but there is also talk that Football League can substitute in a Fair Market Rent basically, for FFP/P&S purposes.

Birmingham's looks easily the cleanest of any at £22.76m price- that's price not profit- and a £1.25m annual rent x 25. 2nd city, not a million miles from City centre and they downsized in other areas, player sales- I can live with that. They were seemingly the most honest of the clubs anyway yet got the biggest punishment to date!

Aston Villa, Derby, Sheffield Wednesday- and must not forget Reading, who sold ground in 2017/18, then Renhe Sports Management Ltd sold it to owners Chinese company in 2018/19 for £37.5m- up from £26.5m in 2017/18, also sold was the Training Ground and some land- even loaned Sone Aluko to Chinese club owned by their owner for £3m!? Lower profile as a club and I hope we win tomorrow for both on the pitch and off the pitch, but they're one of the worst actually in this respect! CEO is also or has also been on EFL Board too- him and the Derby one, Nigel Howe and Stephen Pearce respectively- especially the latter- should be drummed off at the earliest.

Might also add, in the case of Aston Villa they also received £3m in 2017/18 for what may have been HS2 related land and £14.4m in 2018/19! I bet there are many, many people awaiting compensation still for HS2- but Aston Villa got bumped right up- without that £14.4m they fail FFP. That's even with the Stadium sale factored in. Despite 3 years of Parachute Payments- I do hope the Football League are patiently waiting for them to return.

AFAIK, the situation is this- and it goes for all Fixed Assets, not just Stadia:

Stadium sold- Profit can be accounted for if the Stadium is sold and deemed to be at Fair Value. If not then disputes over valuation, adjustments for FFP kick in etc.

Stadium sold at loss- I'd like to think the loss would go against for FFP, as well as in the accounts- in theory it absolutely should, but you're right it hasn't been tested- but I imagine it would be "Loss on Disposal of Tangible Fixed Assets" appearing in P&L. Selling at under value though can or should bring outside trouble greater than the EFL, HMRC would surely want words...?

The solution here for Football- it's so simple. Exclude Profit or loss on disposal of Fixed Assets from FFP/P&S calculations. UEFA do this with their FFP- but even better, the Football League themselves did this until 2015/16 season. In 2016/17 season, for reasons unknown- could easily be an error at EFL HQ- when they transitioned from those old rules to the new ones, this clause was removed and nobody has ever explained it. The old rules themselves excluded Fixed Asset Profits or Losses from the calculations- you can interchange, transfer and flip as much as you like, it's just irrelevant for the calculations- like various other items.

If they did use DRC then that's wholly spurious in justifying a sales cost as, de facto, it depends upon usage. If Derby go down will they take an instant hit given they've no need for a facility that size & purpose? It also potentially assumes they could never rent or co-share an alternate facility.

I've only ever used DRC to justify insurance/contingency cover. For example, I once controlled a very large production facility (warehouse) with extraordinary levels of security specification. The cost of replacement was huge but only so long I I needed to produce what it was at the time producing. The day that requirement ceased, it instantly became a worthless warehouse. For that reason itd intrinsic book value always remained low, yet it's DRC assessed cover remained high. 

[Mr Popodopolous]

On 01/12/2020 at 22:42, BTRFTG said:

If they did use DRC then that's wholly spurious in justifying a sales cost as, de facto, it depends upon usage. If Derby go down will they take an instant hit given they've no need for a facility that size & purpose? It also potentially assumes they could never rent or co-share an alternate facility.

I've only ever used DRC to justify insurance/contingency cover. For example, I once controlled a very large production facility (warehouse) with extraordinary levels of security specification. The cost of replacement was huge but only so long I I needed to produce what it was at the time producing. The day that requirement ceased, it instantly became a worthless warehouse. For that reason itd intrinsic book value always remained low, yet it's DRC assessed cover remained high. 

I've re-read it again and it may have been the Profits method- but is DRC not more reliable? Possibly different methods threw up different results.

It's hard to say because I've looked at a few clubs- for example Stoke when they came down in 2017/18, the Bet365 Stadium was impaired by about £700,000 by 2018/19 or the end of, whereas when Aston Villa dropped in 2015/16, Villa Park was impaired by between £40-45m! Which is right, can both be right?? You'd need forensic accountants to look at the last decade worth of Aston Villa accounts IMO, up to the most recent in 2018/19. That Impairment surely was of use to them when it came to selling and leasing back Villa Park in 2018/19- ooh those accounts, the chopping and changing- like I say a forensic accounting job! Reclassification of Villa Park from Investment Property to Tangible Fixed Asset, this was one of the reasons for the big swing I believe.

Based on that admittedly small sample size, it's hard to say how much the Impairment would be I reckon.

I think Depreciated Replacement Cost has been used as a proxy for Fair Value for hard to measure, unique, specialised individual assets- e.g. football stadia. At least that's what I've read- either way the Football League appear to have accepted the £81.1m but then they chose a valuer who chose questionable examples at best!

https://www.efl.com/siteassets/image/202021/general-news-images/efl-v-derby-county--decision.pdf

Pages 33 well I say 33, 34/123 at the top but easy enough to find.

Quote

v) Events leading up to the sale of Pride Park

This is a good starting point. Starting to re-read it myself, but it covers the stadium stuff and I'm pretty sure the method chosen/used would be in there.

[Mr Popodopolous]

Here we go, though this may only be a first point.

Quote

72) The evidence before us – which we accept – was that (for their own separate reasons) each of the Club and Mr Morris wished the sale of Pride Park to take place at a ‘fair price’ i.e. at a price which fairly reflected its value. However, neither had an up to date valuation of Pride Park. Accordingly, in May 2018 the Club approached Jones Lang Lasalle (‘JLL’) to value Pride Park. Negotiations for JLL to prepare a valuation were progressed, information was provided to JLL by the Club and, as we set out below, in late June 2018 JLL did indeed provide a valuation of Pride Park:

a) JLL assessed the Fair Value of Pride Park on a Profits basis at £81,100,000

b) JLL assessed the Fair Value of Pride Park on a Depreciated Replacement Cost (‘DRC’) basis at £74,400,000, and 

c) JLL assessed the Market Rent of Pride Park on the basis of a sale and leaseback agreement at £4,160,000 per annum.

However there are claims that it was the former- a) £81.1m, but the rent fell to about £1.3m per year as they only had usage of Pride Park for football purposes for 100 days per year. It's at least theoretically possible that they don't even have to pay the £4.16m Annual Market Rent!

Below.

Quote

79) On the same day

a) JLL provided a valuation letter to the Club confirming

i) Its assessment of Fair Value on a Profits basis at £81.1m, and

ii) Its assessment of Fair Value on a DRC basis at £74.4m

JLL also confirmed a market rent for Pride Park of £4.16m on a sale and leaseback of Pride Park to the Club on reasonable terms

b) The Club provided that valuation letter to the EFL. In its covering email the Club explained that it had concluded that it was intending to use JLL’s market rental valuation as a basis for calculating the annual rent payable by the Club after sale – in particular, annual rent would be £1m per annum on the basis that the Club would have access to Pride Park for approximately 100 days a year and would incur associated running costs.

That's, ridiculous. Utterly. Saw £1.13m per season mentioned which coincidentally, by amazing coincidence is that Market Rent/3.65 near enough.

Edited December 6, 2020 by Mr Popodopolous

[Mr Popodopolous]

Because as we can see:

Quote

82) On the same day the Club

a) Entered into a contract to sell Pride Park to Gellaw at a price of £81.1m. The TR1 records that the sale was also completed on 28 June 2018

b) Entered into a leaseback of Pride Park at a rent of £1,139,726 per annum, albeit without there being any restriction on the number of days for which the Club would have access to Pride Park for football purposes.

Spot the difference!

82

b)

vs

79

b)

This quite clearly states that there is a limitation of 100 days, hence the rent is on this basis. Why it is not £4.16m.

Yet, there is zero restriction on the actual number of days.

Edited December 6, 2020 by Mr Popodopolous

[Mr Popodopolous]

With respect to Sheffield Wednesday, I found this interesting little clip- Chansiri...

Clips of him online are somewhat shambolic tbh!

Quote

"We, we do that, because to make er the financial statement look better!"

0:29-0:34

Plus

Quote

"So, the way I do it just make the financial statement stronger."

01:04-01:08

Errr- is there nothing in scope with respect to misrepresentation of financial statement here??

@BTRFTG @Coppello @Davefevs @downendcity @Hxj

We all know it was a paper transaction, but admitting to it??

Are there no grounds to consider it erroneous accounting, based on his own words. Could be bad English of course on his part making it sound quite a bit worse than it is.

Edited December 6, 2020 by Mr Popodopolous

[Mr Popodopolous]

I do wonder if not just the Football League but the real authorities should be having a look at some of these transactions.

On that note, another day and another curious claim.

Sheffield Wednesday again. Will post stuff I read on Derby later...

[Mr Popodopolous]

Okay, the Derby thing.

Seems as per Matt Lawton in the Times Saturday that the Football League have submitted their appeal and it's possible that it contains new evidence, new material.

Though he seems to contradict himself in the article. However if there is new evidence or material, then I wonder if it might materially change anything.

[Mr Popodopolous]

Have been looking over one or two of the sets of Written Reasons again. Some lines really jump off the page- what sort of organisation was Harvey running exactly??

What kind of stewardship was he himself displaying, as head of this organisation? Will pull out the lines and link to the reports.

Edited December 13, 2020 by Mr Popodopolous

[Mr Popodopolous]

As we know, Birmingham got charged for non adherence to Business Plan. It was a small case but worth pursuing I suppose for the legal principle, precedent etc.

However, reading again as I did the Report into the 2019 Hearing, this appeared to have a notable flaw- a flaw which I would have thought ties the hands of the EFL in terms of a successful case!

Even that judgement was flawed but anyway that's to come later.

Quote

35. However it is fair to note that the Club did very promptly admit the breach and, as set out in its letter dated 2 August, agreed to all the terms and restrictions which had been imposed by the EFL. The evidence from the chief executive of the EFL is that the Club has substantially complied with those conditions. The Club is entitled to an allowance of 1 point for mitigation

https://www.efl.com/contentassets/c79763f8e2174f4fb87200a371abf5fa/190322---efl-v-bcfc---decision---final.pdf

Now if there was a material doubt about compliance- and the Business Plan called on them to comply with respect to £10.8m of fees raised, wages saved, amortisation reduced- or more likely a combination of all 3.

The deadline was the March Projections, in practice the end of the January window, though I suppose you can sell to certain countries after January 31st.

As we know, Adams was not sold until summer 2019 and there's arguments for and against in terms of Sustainability but why would Harvey- he was the chief executive of the EFL- intimate that this is the case, if this was not necessarily the case, or at least if it was in some doubt. Surely that would represent a key factor in the 2019 Hearing as an additional factor?? For points or moving forward, seems very odd. That's one oddity.

Edited December 13, 2020 by Mr Popodopolous

[Mr Popodopolous]

The second oddity is why, given media reports- media reports could be wrong of course, seemed to intimate that clubs were in the mood to clamp down on non-compliance at the start of the summer of 2018- an article about Aston Villa's plight at that time suggested just that- this paragraph.

Remember many clubs sold key players to help to reach compliance- we ourselves sold Flint, Bryan and Reid- plus squad players in Magnússon and Djuric, did we not? It's clear we would not have complied without these sales in 2018/19. As well as the raw first team quality, this also represents depth and a bit of a loss of continuity.

Quote

2. The material discussions leading up to this arrangement were conducted over a very short timeframe in August 2018. Various senior personnel within the English Football League ('EFL) and the Club were involved in those discussions. It is absolutely plain that the EFL's representatives involved at that stage were anxious to help the Club achieve a satisfactory position such as it would avoid breaching the P&S Rules. That, we understand, was the EFL's position so far as all clubs in the Championship were concerned during 2018.

https://www.efl.com/siteassets/image/201920/1920-judgements/efl-v-sheffield-wednesday-fc---decision.pdf

Where to begin!  Like I said the players we sold- it depends what it means by help, if maybe players sold later in the summer but rowed back then maybe but a Governing Body absolutely should not be doing this! There's more from this though, absolutely there is more...utterly ridiculous so far!

This is curious as well- if it means the 2016/17 accounts that's one thing but if not...?

The quotation in it! I assume JR=John Redgate, of Sheffield Wednesday and TD=Tad Detko of the EFL. Email from Redgate to Chansiri on 30th July 2018- or the final day of their accounting period, extended from the end of May 2018 and then the end of June 2018. Seems not to be the best punctuated either.

Quote

39. "It was confirmed on my call this afternoon that Aston Villa are not under embargo we are going to review the Villa accounts and the SWFC accounts to see if SWFC can take advantage of any financial allowances that Villa have been able to use to see if we can satisfy P&S other than by assets & player sales".

All of that is worth bolding but maybe I won't! Where to begin again- were the EFL allowing clubs in trouble to look at each others financial submissions for the season ending 2017/18 or what?? It's ambiguous but that's- well! Is rather like the very proposal that Gibson wanted but was voted down in April 2019.

If it means 2016/17 then they were in the public domain and that's fine but if not...? This info is confidential between respective auditors, club who submit and the EFL surely? Maybe some external auditors used by the EFL too. Commercially confidential surely- if it's not public domain of course.

The below does not reflect well on the EFL executive either.  

Quote

46. We should say that the Club had been complaining, with some justification, in our view, that since no decision had been taken by the EFL as to any guidance about sanction in the event of a breach, the Club (and indeed other clubs in a similar situation) could not weigh up the consequences of simply allowing the breach to occur and taking the disciplinary consequences or straining to find a financial solution. Indeed, SH wrote a letter to all Championship clubs on 2 August 2018 acknowledging that this had been causing concern and confusion. It was not until 17 September 2018 (and thus after the conclusion of the matters to which we must turn below) that the sanctioning guidelines were issued.

I'd say he brought in the Sanctioning Guidelines about 2 years too late. Or the EFL board did, whoever.

Why would you bring in Sanctioning Guidelines in September 2018 when the system itself has been running at 3 year periods the first of which ended in 2016/17- even if you allow a year for transition between old and new rules, you surely bring in the Sanctioning Guidelines ahead of March 2017 to come in for the 3 years to end of Summer 2018.

Not that I have much sympathy but he really dropped the ball on that! He really did, or him and the rest of the top brass did!

What Shaun Harvey wrote in the below was incredible- not only did it go past the Accounting Deadline for it but it went past the FFP Deadline. 

Both of these were 31st July 2018- verbatim!

Quote

114. SH recorded on the morning of Sunday (5 August) some matters arising from the meeting on 3 August he sent to his colleagues NC, TD and JK. The part concerning the sale of the stadium was in these terms:

Sale of Stadium

"I appreciate that this matter has been discussed for some time. Putting the (sic) all this to one side, we need to establish a very clear position that meets our rules, as to what form the sale of Hillsborough could take to Mr. Chansiri, so as to be eligible as part of their P&S calculation and what documents we require to support this.

IT IS THE CLUBS CHALLENGE TO CREATE A CONTRACT THAT SATISFIES THEIR AUDITORS THAT IT CAN BE INCLUDED IN THEIR 2018 ACCOUNTS.

Can I suggest we look at what we found acceptable when AVFC sold some of their fixed assets and base our approach around that?

Our objective is to try to get the Club to a position that it is not in breach but at all times within the Rules.

Your prompt attention to this would be appreciated"

Really beggars belief! This was not an existing contract that needed a bit of fine tuning or finalising, this was clearly a document not yet in place. He's encouraging a club- a business- to back-date??

I'm assuming the Aston Villa point is referring to a) The Stadium and b) The apparent HS2 sale of Bodymoor Heath or part of it.

The below also brings further evidence- he seemed to have little issue with this Harvey, in fact it appears to be his idea? He emailed Katrien Meire, at the time at Sheffield Wednesday the following on 6th August 2018.

Quote

119. "You need to move very quickly for this transaction to look credible- we are in your hands".

I say back-dating, an unspoken assumption as Paragraphs 118 and the full part of 119 refer to.

John Warner the auditor also made an error it would appear- available in Paragraphs 123-127 in particular.

https://www.efl.com/siteassets/image/201920/1920-judgements/efl-v-sheffield-wednesday-fc---decision.pdf

What should have happened as soon as 31st July 2018 ticked around, had passed- they should have been charged along with Birmingham on 2nd August 2018- or maybe a bit later if they hadn't yet fully analysed the accounts but at worst they should have been charged in August or early September 2018!

If you haven't got the Stadium Sale completed in time, that's your fault and your fault only.

Edited December 13, 2020 by Mr Popodopolous

[Mr Popodopolous]

Now for Birmingham's 2nd Charge, and then the subsequent appeal- the Breach of the Buisiness Plan despite the Chief Executive of the EFL giving evidence in their March 2019 Hearing that indicated that they had substantially complied with the conditions.

Surely the sale or reduction of costs by March 2019 was a key, key part of the Plan- perhaps the fundamental bit?

The disclosure of a term of the Business Plan to the rest of the Championship clubs, well it was either malicious, incompetent or both- this brings about a bit of a buyers market and distressed sales can give a club grounds for defence.

This is why embargoes tend to be confidential, or one of the reasons anyway. Paragraphs 33 and 34 are pretty pertinent.

https://www.efl.com/siteassets/image/201920/1920-judgements/decision-dated-6-march-2020.pdf

[Mr Popodopolous]

However, in the appeal it appears the original Panel erred and here is why.

It was claimed that the sale of a player- and I assume this was Che Adams ultimately- would not have met P&S regulations as per the required cost even in January 2019- the savings made was a reasonable £1.87m but the target was £10.574m.

Quote

25. The Respondent did not generate a costs saving of not less than £10.574m before 1 February 2019. Its cost saving at this date was £1.87m. Shortly before the time limit expired however, an offer was made by another club to purchase one of the Respondent's players, X, for the sum of X with a further X payable in the event that certain conditions were satisfied. Had that offer been accepted by the Respondent, the costs savings required by Condition 2) would have been made. However, the Respondent considered that the offer for X did not represent his true market value and it declined the offer.

X=Redacted bits.

Assuming it's Burnley and Che Adams. £12m+- unsure what % was add ons, what % was straight fee.

The letter referring them was dated 14th May 2019 but 19th May 2019 was stated elsewhere- intriguingly, Birmingham City Stadium Ltd appeared at CH on 20th May 2019!

Paragraphs 27-29 are decent for this.

Rather interestingly, the below suggests that- and this seemed to have been agreed by both Birmingham and the EFL- that at the first Hearing, the Commission had erred in this respect! Respondent=Birmingham in this case. Star player could be Adams or Jota?

Quote

39. Second, the Respondent accepts that the Commission fell into error in one of its assessment of one aspect of the evidence.  We can summarise the point shortly. The evidence adduced by the Respondent established that it was wiling to transfer one of its star players, X, during the January 2019 transfer window for the sum of X. Shortly before the transfer window closed, an offer was made for X in the sum of X together with an additional X should certain conditions be met. However, the Commission proceeded on the basis that even if the offer had been accepted the requisite cost saving of £10.57m would not have been met (see Paragraph 45 (2) of the Decision). The Appellant and the Respondent agree that this was an error on the part of the Commission. Had the Respondent accepted the offer made in respect of X Condition 2) would have been met.

Paragraph 43- seems the EFL were more bothered about winning their point than going for a Re-Hearing.

Paragraph 70 is interesting! Looks quite long though, I'm not going to type it out!

https://www.efl.com/siteassets/image/201920/1920-judgements/efl-v-birmingham-fc---appeal.pdf

I suppose the big takeaway is that in future, the contract and the numbers will be binding- Best Endeavours as an implied term may well have been superseded.

Binding- Get it done, or else!

Edited December 13, 2020 by Mr Popodopolous

[Mr Popodopolous]

Interesting post, or bit of speculation on DCFC Fans.

Quote

A bunch of rather stuffy 'holders of the rulebook' at the EFL are waiting for DCFC / new investors to buy back the stadium at which point they will find a way to show the club must write back the profit which will enable the EFL to finally have their pound of flesh at the expense of DCFC. I feel that is part of the delay.

I doubt it but I hope so!

Given I had an audience on there at one point, or a mini one

The great thing about the EFL loans is that clubs at this level who take it, it can only go towards PAYE debt and then it is repayable out of Solidarity Payments/Central Awards. This of course is included in P&L in the accounts, so will have a knock on effect for FFP.

Frankly, I'd advise clubs who can afford not to take it, not to take it- borrowing from the future certainly!

[Mr Popodopolous]

Ah, a debate I 'saw' about Derby and finances on another platform the other day reminded me- they took out loans in the summer!

Firstly, it was covered by Matt Hughes in Daily Mail, it may breach the loans thing to more than one club in this League, from the type of lender that MSD is.

The rules in question are as follows, that it might be worth looking at under:

Quote

Sportsmail has learned that several clubs have contacted the EFL demanding clarification on the loan from MSD UK Holdings, that was confirmed in documents lodged at Companies House earlier this month, which they claim is a breach of the regulations. 

 

+3

•  

A company belonging to club owner Mel Morris bought Derby's Pride Park home for £80million

The EFL rules make clear that third party investment in multiple clubs is not permitted, other than lending facilities provided by commercial banks. Section 10 regulation 105.1 of the EFL rulebook states that 'except with the prior written consent of the Board a person, or an associate of that person, who is interested in a club cannot at the same time be interested in any other football club.'

Regulation 106.5 goes on to clarify that it is the responsibility of the clubs to ensure that a person who lends money 'other than in the ordinary course of banking… shall not be acting in such a manner as to cause a breach of any Regulation, and in particular Regulations 104 to 108, and failure to do so shall constitute misconduct.'

The complainants' contention is that Derby's loan is not 'in the ordinary course of banking' as MSD are not registered with the banking regulator, unlike other equity houses such as the Macquarie Group and Shawbrook Bank, who also provide funding to football clubs.

MSD also provided a loan in the region of £80m to Southampton last month, although as they are not involved with any other Premier League clubs there is no question of that breaching regulations.

Southampton sources described the MSD borrowing as a 'bridging loan' which replaced a previous lending facility with Macquarie, which was not renewed.

The Derby complaint is a matter for the EFL Board, who have the power to approve the loan of investigate further. Regulation 112 of the EFL rules gives the Board the authority to relax some of its provisions if it is deemed to be appropriate.

The EFL and Derby declined to comment.

https://www.dailymail.co.uk/sport/football/article-8644537/Derby-County-set-inquiry-threat-deductions-allegedly-breaches-EFL-rules.html

From August.

Next post, I'll look at the regulations in question.

Edited December 15, 2020 by Mr Popodopolous

[Mr Popodopolous]

 Wow, if they are in breach the punishment could be massive!

Quote

111 Powers of The Board in Event of Default

111.1  The Board shall be empowered, upon learning, whether pursuant to Regulations 107, 109 or 113 or otherwise, of any breach of Regulations 78 and 104 to 107 inclusive to require the Club and/or person in question to take such action as is necessary to rectify the breach forthwith or within such period as the Board shall determine.

111.2  Any breach of any of the foregoing Regulations 104 to 107 inclusive, including without limitation knowingly rendering incorrect or incomplete information pursuant to Regulations 107 and 109, shall constitute misconduct. Without prejudice to the range of other sanctions that may be imposed in respect of such breach, any Club in breach of any of the aforesaid Regulations may with the sanction of a special resolution passed at an Annual or Extraordinary General Meeting of The League, be expelled from The League. There shall be no right of appeal against such expulsion.

Default of what though, it's not altogether clear!

However, I've looked at it and I'm not altogether sure which regulation has been broken, if any.

Although...

Quote

105 Interests in More Than One Football Club

105.1  Except with the prior written consent of the Board a person, or any associate of that person, who is interested in a Club cannot at the same time be interested in any other football club.

105.2  A person shall be deemed to be interested in a football club if he, whether directly or indirectly:

Quote

105.2.5  has lent to, gifted money to, or purchased future receivables from or guaranteed the debts or obligations of that football club (or any other arrangement of substantially similar effect) otherwise than in the ordinary course of banking.

Could be the pertinent one here

Also I wonder if it might breach secure funding rules as well- or whether that's a red herring.

Quote

1.1.13 Secure Funding means funds which have been or will be made available to the Club in an amount equal to or in excess of any Cash Losses which the Club has made in respect of the period from T-2 or is forecast to make up to the end of T+2. Secure Funding may not be a loan and shall consist of:

(a)  contributions that an equity participant has made by way of payments for shares through the Club’s share capital account or share premium reserve account; or

(b)  an irrevocable commitment by an equity participant to make future payments for shares through the Club’s share capital account or share premium reserve account. This irrevocable commitment shall be evidenced by a legally binding agreement between the Club and the equity participant and may if the Executive so requires be secured by one of the following:

(i)  a personal guarantee from the ultimate beneficial owner of the Club, provided that the Executive is satisfied that

1)  he is of sufficient standing; and

2)  the terms of the guarantee are satisfactory;

(ii)  a guarantee from the Club’s Parent Undertaking or another company in the Club’s Group, provided that the Executive is satisfied that

1)  the guaranteeing company is of sufficient standing; and

2)  the terms of the guarantee are satisfactory;

(iii)  a letter of credit from a Financial Institution of sufficient standing and an undertaking from the Club’s directors to The League to call on the letter of credit in default of the payments from the equity participant being made;

(iv)  payments into an escrow account, to be paid to the Club on terms satisfactory to the Executive; or

(v)  such other form of security as the Executive considers satisfactory; or

(c)  such other form of secure funding as the Executive considers satisfactory.

Granted, Morris may have stuck in the necessary equity or similar, but if not...?

Is this organisation of sufficient standing? Debatable!

Millenniumram- took a bit of a read of DCFCFans- you're having a laugh with this, the EFL surely hate Morris and rightly so! Birch was seemingly handpicked by Parry btw.

Quote

I’m sure Steve Gibson is delighted that another man with Derby links is now involved at the EFL. Reckon we can get Mel involved somewhere as well, once he sells up here?

 

Edited December 15, 2020 by Mr Popodopolous

[Baba Yaga]

Not related to the Championship but I think this is quite interesting...

 

Ligue 1 clubs stare into financial abyss after huge TV deal collapses

https://www.theguardian.com/football/2020/dec/15/ligue-1-clubs-stare-financial-abyss-tv-deal-collapses-mediapro

 

TV deal collapses in France. Sounds like Mediapro made a reckless gamble by offering France the second highest TV deal in Europe? The deal that collapsed was worth around 814m euros per season and the new deal will be worth around 700m per season so the article is perhaps a little over the top. Apparently the promoted clubs Lorient and Lens had net spends that were around 20m euros on the back of the original deal. Also Nimes (who bought Eliasson, lets hope they still pay ) had a net spend above 10m euros and they survive on gates of around 12-14,000. Those clubs look like the worst exposed to me and Nimes and Lorient are both in a relegation battle. Reminds me of the ITV digital saga although with this the clubs have to battle this at the same time as losing gate receipts.

 

[Hxj]

The case against Derby will be - is a Private Equity Hedge Fund lending money acting in the ordinary course of banking.

I am sure that loads of legal fees will be spent on that one!

 

[Mr Popodopolous]

1 hour ago, Hxj said:

The case against Derby will be - is a Private Equity Hedge Fund lending money acting in the ordinary course of banking.

I am sure that loads of legal fees will be spent on that one!

 

Thanks.

The bit about secured funding that I jumped to seems a bit of a red herring then- almost seems not worth it for the Derby case! Doesn't benefit them FFP wise.

[Mr Popodopolous]

I've critiqued some of their fans but these two posts nail some of the Sheffield Wednesday situation- good content. Post before these two is good as well.

Quote

Couple of very crucial points in all this that seem a bit odd to me.

 

1. Why were no minutes taken at the August meeting between the club and the EFL?

 

2. Why, when the EFL knew knew no written agreement was in place before 31/7 did they then accept what seems to be a backdated agreement after that date?

 

3. Why, some ten  months later, has someone at the EFL found that agreement and called foul? 

 

sorry but non of that adds up.

 

Quote

It seems to me that the EFL executive wanted an easy life and actually concentrate on football not regulations.

 

Reading the report it seems to me Villa were fairly creative and the EFL accepted it, so let's try it here again and brush / carpet scenario.

 

Perhaps there was a reason Shaun Harvey got out - who knows.

 

It seems that because we then failed to send accounts in March 19 this got brought back up the agenda and we got placed under embargo

Can't argue with most of that! Sounds about right...shocking for the rest of the clubs who are complying, if they are assisting clubs beyond the manner in which they should but not a surprise at that time? Parry would surely have taken a very different view.

Quote

I believe there are emails from Shaun Harvey to the club which were considered but not mentioned in the report. The club want these emails given further consideration by the committee. Shaun Harvey appears to have acted some what independently and this is what I believe to be the crux of the appeal.

Or the bolded bit in particular!

I and a few of us on this thread thought this could be the case over the last year or 2.

Edited December 18, 2020 by Mr Popodopolous

[Mr Popodopolous]

This has potential to be interesting!

https://mobile.twitter.com/KieranMaguire/status/1340203691786317824

Far simpler of course, to not class Impairment of Players as a Covid cost much like UEFA. 

Everton eg have written down £30-40m in player Impairment. Will help them down the line with player profit, but not now.

Certainly not with UEFA but it certainly isn't clear that domestically the usual principle of hit now for pure profit later will apply!

[Mr Popodopolous]

Saw a potentially very interesting post elsewhere, on another forum- from November.

Basically, appeal was won by Sheffield Wednesday but EFL were refusing to reinstate the points.

Chansiri was threatening to go to court and EFL said it could result in suspension and possible expulsion.

Could be rubbish of course, but then again Chansiri's words "We have to accept it" about the 6 point reduction, that could be it.

Tweet deleted, but there's a screenshot of it.

Edited December 22, 2020 by Mr Popodopolous

[Mr Popodopolous]

Millwall lost £10m last season.

Worth looking at some of last seasons accounts, to try and extrapolate as to how our Revenue will look- ie % lost on tickets etc.

Fine for FFP, just shows further the importance of player sales at this level. Don't think they'll be pushing the higher end of £39m in terms of investment- ie £15m lower 3 year loss- then share capital or similar takes it to £39m or anything in between but they'll keep plodding along I expect.

Edited December 24, 2020 by Mr Popodopolous

[Mr Popodopolous]

Haha. Or should that be Ho Ho!

Let us hope that their travails continue from Boxing Day and beyond, into 2021!

 

Edited December 24, 2020 by Mr Popodopolous

[Hxj]

My initial view on Millwall is actually how little impact Covid-19 has had on their results.

Probably because they have relatively low commercial income and 10 months of the period including Christmas had already passed.

 

 

[Mr Popodopolous]

I note that Sheffield Wednesday have not yet submitted their accounts to the EFL for 2018/19, if this article is accurate.

https://www.thestar.co.uk/sport/football/sheffield-wednesday/five-months-why-sheffield-wednesday-still-yet-file-their-201819-accounts-3074428

Couple of key (well key in terms of local media justification anyway, arguably). bits.

Quote

One of the central difficulties was that it was not known in which set of accounts the controversial £60m sale of Hillsborough stadium should be included in until the dust settled on the legal wrangle with the authority.

 

Quote

Some 43 days after that successful appeal verdict saw Wednesday handed back six points it is understood that these complications remain and so Wednesday are yet to hand their accounts over to either Companies House or the EFL.

Should be a soft embargo surely!

Yet...

Quote

The Star has been given no indication that this is of any immediate concern to the EFL and we are lead to believe at least one other Football League club is yet to hand over their accounts.

Derby?

If not, why not? Surely they have certain projected numbers to work with at least- I mean, it's not as if it's slightly overdue- Sheffield Wednesday's accounts ran until July 31st 2019 and were due on April 30th 2020.

They took the 3 month extension, so that's July 31st 2020- 12 points was halved on November 4th 2020- we are now on December 27th 2020- this article itself was written on December 21st 2020- nearly 7 weeks after the partially successful appeal.

As for Derby, bit more complex I guess as the EFL appeal is still not decided yet AFAIK, but their timeline was:

1. Accounts to June 30th 2019
2. Due by March 31st 2020.
3. Took the 3 month extension- that'd be June 30th 2020.

Still nothing, though their interim reports and Future Financial Information contained in the Independent Hearing Written Reasons, well it suggests it's not ideal!

What do we think @Davefevs @Hxj - soft embargo territory?

More importantly perhaps, is there any accounting argument to adjust out the £60m entirely-for FFP/P&S at least?

Company/Group structure seems interesting, with all those Sheffield companies, transfers of Share Capital etc. Apologies, may have asked it before but I have to wonder given the Scenarios outlined in the Written Reasons.

Edited December 27, 2020 by Mr Popodopolous

[Davefevs]

In fairness, Wednesday and Derby’s structures are too complicated for me to get a handle of their positions, but both appear to be taking the pi$$.

[Hxj]

There is an argument for Sheffield Wednesday, which I particularly like, which goes along the lines of -

You have claimed the ‘profit’ in a set of accounts - what provision in the regulations allow you to claim it in another period?

[Bristol Rob]

 

 

[Bristol Rob]

This could well need merging with one of the other FFP type threads, but there wasn't anything on the first couple of pages that looked like an obvious dropping off point!

[Lrrr]

Just shows the disparity with parachute payments, we get £5.3m and Cardiff get £43m

[Bristol Rob]

https://footballleaguefc.com/category/player-wages/championship-player-wages/amp/

 

Apologies if that link has already been posted.

Might be a load of of guff, might be fairly accurate.

[Mr Popodopolous]

Birmingham news.

It does. Bellingham the big one, unsure of the final fee. Harding to Rotherham was from academy, pure profit and they sold a Spanish striker for more than they brought him for. Profit and some removed amortised there! Sure some higher earners left this summer too?

They're not much of an FFP concern for me now. Seem to have learnt their lesson, plus signings such as Pedersen, Sunjic, Leko- and as on frees due to age, to some extent maybe, Halilovic and McEcheran all feel like saleable assets for differing reasons.

Etheridge as a Goalkeeper could also retain value ad they have a longer lifespan, depending on fee paid of course. Lots of free transfers means no amortisation in those cases!

Interesting how on time they are with accounts and similar financial reporting obligations though. Even with Covid!

They don't seem to dare drag it our for months over in Hong Kong, see Derby and Sheffield Wednesday as prime examples and the latter are repeat offenders! They always release on time, whether good or bad news.

Edited January 8, 2021 by Mr Popodopolous

[Mr Popodopolous]

Reading's FFP is surely biting a bit.

Clearly Bayern is a fantastic chance for young players. Think Reading might be walking the tightrope- but you turn down £10m for Moore in summer 2018, you turn down bids for Swift and Meite (IIRC), fairly sure Loader was linked with clubs- not saying you get a huge amount for him but as an academy product that £2m helps. Then again Dale Jennings went to Bayern from Tranmere as a youth?

They surely have saleable assets but the problem is they sell very few! That 2nd Tweet...Ouch, indeed! Again though if you don't look to trade...

 

Actually slightly surprised they aren't- given what we know of 2017/18 and 2018/19 results- on course to breach in the 3 years (4 but 1 + 1 + 2/ 1= New 3 Year) to 2021, in the usual assessments in March.

 

In the past I was possibly crowing a bit about other clubs and their downfall or travails. Still hope certain ones have FFP related travails but survival solvency wise is key, so too is safety of those in clubs. Slightly more moderate me with this 2nd Wave- even Derby. No issue with hoping they lose their EFL appeal, get relegated, laughing at their takeover and non payment of wage debacles- like clockwork- but yeah.

 

Another reason I am not for crowing is that the longer it goes on without signings here, goes on with recalling loanees who were loaned out for a reason, the more I wonder if we are under soft limits/Business Plan related issues. Might only be for this year, come summer with the many out of contract and the rolling on of the FFP cycle it improves but just feels like there are some soft limits in place here...once last seasons accounts released we shall know more!

 

Losing a defender rated at £15m to Bayern on a free though, an extreme example but an example nonetheless of what can happen when you might roll the dice! Maybe they're under a Business Plan that has absolute obligations to stay the right side of the line and they deviate from it, it's a Hard Fail? Perhaps a £30,000 a week offer (just for example) would push them into breach this March?

Edited January 8, 2021 by Mr Popodopolous

[Mr Popodopolous]

That Parachute Payment gap- Kinnell. Do think it should be paid as loans, so it helps with solvency and Balance Sheet but has no positive or negative effect on Profit and Loss- therefore keeping clubs in check and pushing the pressure on them to comply with FFP earlier in their stint down here.

Agree @Hxj like that argument a lot with respect to Sheffield Wednesday and their accounts.

Maybe that is the precise or at least the broad nature of the delay to their accounts- could the EFL be pushing back with that very line of argument about inclusion of it in 2018/19 accounts? Be it at Companies House or for FFP purposes.

I'd expect the EFL under Rick Parry to take that stance for sure or explore it- unsure about under Harvey?

Who knows, given the whole debacle that was their (in the timeframe unsuccessful) sale and leaseback of Hillsborough, maybe the auditor isn't happy or they're struggling to justify it to him. It was indicated in the Independent Hearing that nobody- that is Chansiri, the club, the EFL- and maybe even the auditor- took Independent legal advice or adequate Independent legal advice ahead of this transaction. Maybe I misread it but sure the Auditor said to the Panel that he shouldn't have signed it off.

Edited January 8, 2021 by Mr Popodopolous

[Mr Popodopolous]

From August, but a prescient Tweet in the circs for Reading now!

Had they sold one or two, not even all 4 to begin with but one or two at the appropriate time, they might have had headroom to offer Richards a suitable new deal, thereby protecting his value, either for the future or to sell quite big now. Now they may well lose him to Bayern on a free- crazy tbh!

Edited January 8, 2021 by Mr Popodopolous

[Mr Popodopolous]

Took a bit of a look at a few of the relevant clubs here...and one 'so near, yet so far!'

There are some estimates and provisional figures included- but some absolute ones too.

Reading FC. Should we use the Club or the Parent/Group Company? Swiss Ramble suggested excludable costs- total cost of academy, infrastructure etc- came to £6m per season.

Reading FC.

2017/18- LOSS- £20,952,868

2018-19- LOSS- £30,115,218

£51,068,086

Assume £12m in allowable costs- and a profit in 2016/17 and they're fine but surely heading for trouble...

LOSS in 2017/18 also includes a PROFIT of £6,518,222 on Sale and Leaseback of Madejski Stadium and £8,171, 464 in 2018/19- this seemed to be the Training Ground or former training ground- both of these Related Party Transactions as well as a frankly disgraceful £3m loan fee for Aluko! That £20,952,868 LOSS replaces the 2016/17 profit in the next 3 year rolling. That loan fee was from the owners Chinese club btw.

Renhe Sports Management Limited.

2017/18- LOSS- £29,893,815

2018/19- LOSS- £11,753,640

£41,647,275

I am assuming the same allowable costs of £12m.

LOSS in 2018/19 includes a PROFIT of £29,928,818. This encompassed the resale of the Madejski Stadium to the Chinese company, the aforementioned Training facilities, some land around the stadium and the aforementioned £3m for Aluko- so that's £32m in offset losses.

No profit in 2017/18 as it was Renhe who 'purchased' it...very suspect goings on. They made a profit in 2016/17 but the new bit of the cycle is 2017/18 and the huge loss. Obviously parent company purchasing would only leave the profit in the company underneath- which one you choose for FFP assessment doesn't matter, some of the losses are huge. Especially the underlying losses once exceptionals are stripped out.

Only saving grace to some extent perhaps is the bit that says:

Loss for the financial year is attributable to- and this is the combined total ie over 2 years:

• Owners of the Parent Company- £37,855,167
• Non-controlling Interests- £3,792,108.

Not entirely sure how it works but it's huge losses all the same- would we exclude Non-controlling Interests?

Edited January 9, 2021 by Mr Popodopolous

[Mr Popodopolous]

 Derby- some of these are factual and some of these are club projected figures!

THIS indicates a surge in amortisation.  A surge into 2019/20. Projected. This was in April and May 2019 remember.

Quote

Can you please explain the variances in Player related amortisation charges from £6.5m in 2017/18 down to £4.6m in 2018/19 up to £25.1m in 2019/20? As part of this, please explain how the charge reduces from £3.3m in the 6 months to December 2018 down to £1.2m in the 6 months to June 2019?

Oof. A surge of £20.5m in 2019/20! Or not far off £20m from the 2017/18 season.

Quote

v) Events leading up to the sale of Pride Park

66) In early 2018 Mr Morris began to consider how increased revenue might be generated from Pride Park. He concluded that there could be significant financial benefit to be derived from developing Pride Park into a multi-use, covered stadium, and began to explore the availability of funding for such a project. However, potential funders were reluctant to consider investing in such a project while Pride Park was owned by the Club; they were only prepared to consider investing if Pride Park was ‘extracted’ from the Club, and developed as a stand-alone venture.

67) At around the same time, in spring 2018, the Club provided financial information to the EFL in accordance with the P&S Rules (‘the Club’s P&S Information’) for the 36 month reporting period to 30 June 2018. The Club’s P&S Appendix 1 Form, provided as part of the Club’s P&S Information, recorded

a) A loss before tax for T-2 (year to 30 June 2016) of £14,725,00015 with Adjusted Earnings Before Tax of (-£9,019,000)

b) A loss before tax for T-1 (year to 30 June 2017) of £7,873,00016 with Adjusted Earnings Before Tax of (-£4,686,000)

c) A forecast loss before tax for T (year to 30 June 2018) of £27,445,000 with Adjusted Earnings Before Tax of (-£23,970,000)

68) The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £50,043,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was thus (-£37,675,000). That aggregate figure for Adjusted Earnings Before Tax was in excess of the LLT and very close to the ULT.

69) On 12 April 2018 the EFL wrote to the Club raising various queries about the Club’s P&S Information. The Club responded on 25 April 2018, enclosing a revised P&S Appendix 1 Form That revised P&S Appendix 1 Form recorded

a) A loss before tax for T-2 (year to 30 June 2016) of £14,725,000 with Adjusted Earnings Before Tax of (-£15,271,000)

b) A loss before tax for T-1 (year to 30 June 2017) of £7,873,000 with Adjusted Earnings Before Tax of (-£4,686,000)

c) A forecast loss before tax for T (year to 30 June 2018) of £27,445,000 with Adjusted Earnings Before Tax of (-£23,970,000)

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus still £50,043,000, but its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 had become (-£43,927,000). That aggregate figure for Adjusted Earnings Before Tax had thus become a figure in excess of the LLT and the ULT

Quote

81) On 28 June 2018 the Club did indeed sent a further revised P&S Appendix 1 form together with various other P&S Information. That further revised P&S Appendix 1

a) Continued to record a loss before tax for T-2 (year to 30 June 2016) of £14,725,000 with Adjusted Earnings Before Tax of (-£15,271,000)

b) Recorded a loss before tax for T-1 (year to 30 June 2017) of £20,575,000 with Adjusted Earnings Before Tax of (-£13,948,000)

c) Recorded a forecast loss before tax for T (year to 30 June 2018) of £55,724,000, but recorded Adjusted Earnings Before Tax for T of +£6,737,000.

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £91,024,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was thus (-£22,482,000). That aggregate figure for Adjusted Earnings Before Tax was thus in excess of the LLT but below the ULT.

As we can see, some of the figures changed a bit! Assume it started with the club and then changed to the Group- and rightly so!

Change in treatment of an RPT or similar in the 2015/16 accounts too. Although a) makes no sense- can only assume that loss before tax is the club but the consolidated is the Adjusted Earnings before Tax- not the best written! Or the easiest to follow. Allowable costs per season anyway seem to be in the range of £6-7m.

Finally!

Quote

That Appendix

a) Recorded a loss before tax for T-2 (year to 30 June 2016) of £14,725,000 with Adjusted Earnings Before Tax of (-£15,271,000)

b) Recorded a loss before tax for T-1 (year to 30 June 2017) of £20,575,000 with Adjusted Earnings Before Tax of (-£13,948,000)

c) Recorded a forecast loss before tax for T (year to 30 June 2018) of £55,724,000 with Adjusted Earnings Before Tax for T of (-£272,000).

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £91,024,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was thus (-£29,491,000). That aggregate figure for Adjusted Earnings Before Tax was thus in excess of the LLT but below the ULT

Significant overshoot on anticipated losses for 2017/18, their actual consolidated losses that year were- and yes this includes the £39.940,387 profit on Pride Park- ~£1,145,956. Around £41m or thereabouts- Rowett compensation won't have been forecast either- £1,850,000 but that's an extremely high forecast loss! Big overshoot even with the Stadium Sale and Rowett compensation. £10-15m over in fact- forecast loss would have predated both. Would be intrigued to know how that came about. About £12.8m out basically!

Quote

97) On 18 February 2019 the EFL emailed the Club: ‘

Thank you for you’re the additional submissions you have made in relation to the profit on the sale of the Club’s stadium figure that is to be used in the Club’s 2017/18 P&S Calculation.

In summary we accept that the 2017/18 P&S Result can be adjusted to reflect the £81.1m sales price.

As you know we have struggled to gain sufficient evidence to support the licence fees that were used in order to prepare the Profits Method valuation included in the JLL report … However we have gained comfort on the £81.1m sale value from the fact that the independent JLL report performed the DRC valuation (£74.4m) based on a mid-point construction cost per seat of £3,000. If JLL had based their DRC calculation on the high-point construction cost per seat of £3,500 instead of £3,000 the valuation would come out at approximately £86.1m instead of the £74.4m. A valuation of £81.1m would equate to a construction cost per seat of circa £3,290 and therefore comfortably within the range provided by JLL.

From a review of the Club’s 2017/18 P&S Result the amendment to a sales price of £81.1 would result in 2017/18’s (T) adjusted profit being £6.428m (prior to final figures being submitted).

Please let me know if this is consistent with your calculations’.

Quote

99) On 26 February 2019 the Club emailed Mr Karran to ask whether he would be able to ‘talk through a couple of items’ on the Club’s planned P&S Submission. That conversation took place on 27 February 2019, shortly before the Club’s 2019 P&S Submission was due.

100) The Club did not in fact provide its 2019 P&S Submission by the 1 March deadline provided for in the P&S Rules, and on 6 March 2019 the Club was placed under embargo because of that nonprovision.

101) On 29 March 2019 – the date on which the Annual Report and Financial Statements of the Club and its parent for the year ended 30 June 2018 - the Club provided its 2019 P&S Submissions to the EFL. The P&S Appendix 1 form provided with the 2019 Submissions

a) Recorded a loss before tax for T-2 (year to 30 June 2017) of £20,575,000 with Adjusted Earnings Before Tax of (-£13,407,000)

b) Recorded a loss before tax for T-1 (year to 30 June 2018) of £1,146,000 with Adjusted Earnings Before Tax of £7,207,000

c) Recorded a forecast loss before tax for T (year to 30 June 2019) of £38,727,000 with Adjusted Earnings Before Tax for T of (-£31,517,000). The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £60,448,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was (-£37,717,000). That aggregate figure for Adjusted Earnings Before Tax was accordingly in excess of the LLT but below the ULT.

102) The embargo that had been placed on the Club due to non-provision/late provision of the 2019 Submission was lifted. However, an embargo remained in place to reflect the proximity of the aggregate figure for the Club’s Adjusted Earnings Before Tax to the ULT

I am going to assume that they made say £4m from the playoffs- that's revenue, TV money and Gate Receipts to the losing side- and that the following season, they made £4m from Lampard to Chelsea compensation- and now for a very generous assumption, wage bill FALLS by the same amount amortisation rises.

THAT feels like soft embargo territory though, why were they able to splash millions on Bielik and the Rooney- mostly sponsor funded granted- deal! Other clubs have been soft embargoed and under a Business Plan for less?

Wow, that's even worse than I thought if accurate.

Quote

106) Further queries – including what the parties described as ‘the stadium valuation question’ – continued to be addressed in correspondence during April, May and June 2019. All the while the embargo remained in place. On 11 July 2019 the EFL wrote to the Club

a) Acknowledging that, in light of the receipt by the Club of substantial compensation following the departure of its first team manager and staff to Chelsea, the Club’s 3 year aggregate figure for Adjusted Earnings Before Tax was ‘circa £37.1m’

b) Explaining that even though that figure involved a £3.1m ‘sensitivity in relation to stadium rent for the 2018/19 season that the EFL and Club are still in ongoing discussions over’, even with that sensitivity the Club’s forecast result fell within the ULT

https://www.efl.com/siteassets/image/202021/general-news-images/efl-v-derby-county--decision.pdf

Despite the Lampard compensation, and the Rowett compensation and reaching the Playoff final, they still were not far off failing! I was sure the Lampard compensation was in 2019/20 however.

Sounds like their FFP loss for 2018/19- by which I mean that season in isolation- was in the region of £30-31m! I'm assuming that's not quite right and am still factoring in the Playoff final £3-4m and Lampard compensation £3-4m the next year. To lose that much, yet gain so much- cannot be right. Lampard compensation in small instalment in 2018/19 and the remainder- ie the bulk- in 2019/20?

If that was the case though, then they clearly undershot on their losses for 2018/19 as they overshot for 2017/18- they can't have anticipated the playoff final and Lampard compensation in March though?

Edited January 9, 2021 by Mr Popodopolous

[Mr Popodopolous]

Interesting Tweet too- surely it's not a restrictive financial plan imposed by Mel Morris. Local journo...

If it's them agreeing to an EFL one- or should that be agreeing hahaha. the following Tweet hoping it's a competitive one...whistling in the wind!

Presumably such a plan is to ensure they stay the right side of the FFP tightrope! Ha! That £7m profit is to fall off the books- ie the Pride Park sale and leaseback- after this year, to be replaced by whatever the final 2018/19 loss was- when it's the 2017/18, 2018/19 and then averaged 2019/20 + 2020/21...new cycle might be 2018/19, 2019/20 + 2020/21 and 2021/22.

EFL would not give one crap about competitiveness, especially under Parry and with that successful defence- albeit amortisation charge subject to appeal.

Wonder if the extension of Butterfield, Blackman and Johnson in the final month of the accounts materially affected the amortisation- could it have kicked the can down the road to some extent into 2019/20?

Maybe halves the remainder for 2018/19 but pushes that into 2019/20? Dunno.

Lampard compensation- you can't include it twice! Similarly, the amortisation still needs accounting for in full- if reduced in 2018/19, then more in 2019/20 surely. Doesn't matter how you split it basically.

Am not suggesting it was included twice btw, just confused as to which season it appears in! Or would appear in as and when accounts finally appear.

Edited January 9, 2021 by Mr Popodopolous

[Davefevs]

So Derby have had to fall in line with the amortisation model that the other 71 EFL clubs follow.

[Mr Popodopolous]

Didn't know this, good news if true!

My interpretation of the financial plan was irrespective of amortisation methods, they will have been on financial FFP related targets.

Eg "Your losses are escalating and terrible- you need to cut wages by x, or sell players to the value of y- or- and Good luck in this climate- get significant naming rights at true arms length- in order to bring yourselves into line for FFP assessment". Assume that would mean March though it's unclear how well that bit is or has been enforced. You have to reach this in losses or cost reduction though or face the consequences.

I find two elements of their case quite curious- why the divergence in sales price- the range I guess but the EFL seemed to get diddled under Harvey? £74,4m to £81.1m- and then the rent bit was £4.16m per season, yet because of days used fell to £1.1m per season or so- only way that can be justified is if the commercial revenue is no longer at the club, or failing that the rent goes back up- even if not in cash but for FFP- to that £4.16m per season- cannot have it all ways.

In further Derby news/speculation.

I'd have to re-read again the document but I am sure that the 100 days thing was a dodge too. 365 days per year would be the £4.16m, was for football purposes- this being 100 days per year- yet there was some sketchiness in the reasons as well as to whether that was worked around.

The price is shady anyway IMO but failing that, either:

1. The commercial revenue by which I mean specifically non football related income, excluded from the club's FFP calculations.
2. The rent- even if FFP if not reality- goes up by the extra £3m per season or so as was the case originally.

Nothing else feels acceptable.

As far as the amortisation point goes, if they have been made to go back and do it in the straight line method, that could help them moving forward but I wonder how it would adjust their historic results to date. For the worse I expect. Adjustment for the worse would surely push them into breach to 2019, maybe 2018 too but definitely given the tight margins, 2019?

Edited January 9, 2021 by Mr Popodopolous

[Mr Popodopolous]

With respect to the rent bits.

Quote

v) Events leading up to the sale of Pride Park

66) In early 2018 Mr Morris began to consider how increased revenue might be generated from Pride Park. He concluded that there could be significant financial benefit to be derived from developing Pride Park into a multi-use, covered stadium, and began to explore the availability of funding for such a project. However, potential funders were reluctant to consider investing in such a project while Pride Park was owned by the Club; they were only prepared to consider investing if Pride Park was ‘extracted’ from the Club, and developed as a stand-alone venture.

Quote

a) JLL assessed the Fair Value of Pride Park on a Profits basis at £81,100,000

b) JLL assessed the Fair Value of Pride Park on a Depreciated Replacement Cost (‘DRC’) basis at £74,400,000, and 

c) JLL assessed the Market Rent of Pride Park on the basis of a sale and leaseback agreement at £4,160,000 per annum.

Seems quite fair to me, rent yield rate wise anyway!

Gets murkier now?

Quote

77) On 26 June 2018 the Club

a) Forwarded to the EFL an email that purported to have been sent to the Club by JLL at 18.01 on 21 June 2018 in which JLL

i) Explained that it (JLL) had ‘calculated a [DRC] of £74.4m’ for Pride Park, based on a cost of £3,000 per seat, based on a total number of 33,455 seats, assuming an economic life of 60 years and based on an underlying land value of £4.1m

ii) Explained that it (JLL) assessed the Fair Value of Pride Park on a Profits basis at £81.1m. We set out below why we say ‘… purported to have been sent to the Club by JLL …

And moreso.

Quote

b) Forwarded 2 calculations that purported to have been attached to JLL’s 18.01 21 June 2018 email setting out ‘JLL’s workings’:

i) The first calculation set out how JLL had come to assess the Fair Value of Pride Park at £81.1m on a Profits basis

ii) The second calculation set out how JLL had come to assess the Fair Value of Pride Park at £74.4m on a DRC basis Again, we set out below why we say ‘… purported to have been attached …’

c) Forwarded an extract from a valuation of Pride Park that JLL had undertaken for the Club in 2013

d) Informed the EFL that as and when it received further information from JLL (including a summary report), it would forward the same to the EFL.

78) On 26 June 2018 the EFL emailed the Club confirming that ‘if the final report is an official signed report by JLL and includes the information in the emails and the calculations then I would have thought this would be reasonable to support a sales price’.

Even more?

Quote

79) On the same day

a) JLL provided a valuation letter to the Club confirming

i) Its assessment of Fair Value on a Profits basis at £81.1m, and

ii) Its assessment of Fair Value on a DRC basis at £74.4m JLL also confirmed a market rent for Pride Park of £4.16m on a sale and leaseback of Pride Park to the Club on reasonable terms

b) The Club provided that valuation letter to the EFL. In its covering email the Club explained that it had concluded that it was intending to use JLL’s market rental valuation as a basis for calculating the annual rent payable by the Club after sale – in particular, annual rent would be £1m per annum on the basis that the Club would have access to Pride Park for approximately 100 days a year and would incur associated running costs.

80) The following day a) The EFL responded ‘The report is fine and I think your comments regarding rental on the face of it are also OK from our perspective’ b) The Club acknowledged that response and confirmed that it would provide a revised P&S submission to the EFL

The EFL should have maybe accepted it, but insisted on a final analysis a) on the Market Rent as per JLL and b) the DRC being the appropriate FFP method- Birmingham's stadium was it seems valued using that, according to some docs on HKSE. It seems sensible for such unique, hard to value buildings!

100 days per year sounds like football and related to football revenue to me.

Now amazingly, they just reneged!

Quote

82) On the same day the Club

a) Entered into a contract to sell Pride Park to Gellaw at a price of £81.1m. The TR1 records that the sale was also completed on 28 June 2018

b) Entered into a leaseback of Pride Park at a rent of £1,139,726 per annum, albeit without there being any restriction on the number of days for which the Club would have access to Pride Park for football purposes

100 days=£1.1m or thereabouts in rent- no restriction fine, but what about the other £3m or so in rent per year!

Like I say, the only acceptable method is that Commercial Income falls away somewhat- ie non football related Commercial Income- for it to all stack up.

Seemed to go against their own valuers viewpoint too! Some of the next bits are incredible too- what's Independent about the 2nd bolded bit of the below!

Quote

83) On 30 June 2018 JLL provided a formal ‘Valuation Advisory’ of Pride Park. That document was reviewed by the Club and on 3 July 2018 the Club provided certain comments and corrections. JLL appears to have accepted those comments and corrections, and later that same day provided its ‘final’ valuation report to the Club (‘the 2018 JLL report’). We return to consider that report in greater detail below – it suffices for the time being to say that JLL

a) Continued to value Pride Park on a Profits basis at £81.1m

b) Continued to value Pride Park on a DRC basis at £74.4m

c) Continued to assess the market rent of Pride Park on the basis of a sale and leaseback agreement at £4.16m

Even if the price is consistent, how the hell can you accept £3m per year dropping off the rent! It's JLL's own Valuation Advisory??

First year rent free also seems questionable in this context- Chansiri and Morris have possibly utilised this.

However, it possibly even gets worse and murkier.

Quote

84) Before we leave the 2018 JLL report we return to the exchanges that took place between JLL and the Club, and the Club and the EFL, in late June 2018:

a) As we have said above, on 26 June 2018 Mr Holt of the Club sent an email to Mr Karran confirming ‘stadium valuations [by JLL] of £81.1m using a profits method and £74.4m using a DRC method’. Mr Holt’s email

i)Began ‘As discussed yesterday, please see the email below from JLL and attached workings’ which were said to confirm such valuation

ii) Set out below his text an email that purported to have been sent by JLL to the Club at 18.01 on 21 June 2018 titled ‘JLL – Pride Park Draft’ and which stated (under the heading ‘Fair value on basis of Depreciated Replacement Cost’

(1) ‘Having reviewed evidence we have adopted a cost of £3,000 per seat for Pride Park, based on a total number of 33,435 at the venue’

(2) ‘We have assumed an economic life of 60 years’

(3) ‘In total we have calculated a [DRC] pf £74.4m’

iii) Attached inter alia a document titled ‘JLL – Derby County – Pride Park – Valuation Model 1 – 21 June 2018.pdf’ which comprised the calculation by which JLL had arrived at its DRC valuation of £74.4m

b) In the documents disclosed by the Club there was indeed an email sent by JLL to the Club at 18.01 on 21 June 2018, to which a document titled ‘JLL – Derby County – Pride Park – Valuation Model 1 – 21 June 2018.pdf’ was attached. However

i)That email stated (under the heading ‘Fair value on basis of Depreciated Replacement Cost’)

(1) ‘Having reviewed evidence we have adopted a cost of £3,000 per seat for Pride Park, based on a total number of 33,435 at the venue’

(2) ‘We have assumed an economic life of 50 years’ (not 60 years)

(3) ‘In total we have calculated a [DRC] pf £57.8m’ (not £74.4m)

ii) The attachment comprised the calculation by which JLL had arrived at a DRC valuation of £57.8m (not £74.4m). That calculation

(1) Used a cost per seat of £3,000

(2) Used a capacity of 33,455 39

(3) Assumed economic life for the stadium of 50 years, giving an adjusted remaining economic life of 28 years

(4) Assessed depreciation at 44% and functional obsolescence at 5%

c) In the Club’s disclosure there was a further email sent by JLL to the Club at 15.17 on 25 June 2018, to which a document titled ‘JLL – Derby County – Pride Park Valuation Model – Cost v2 – 25 June 2018.pdf’ was attached:

i)The email (in response to a query from Mr Holt at the Club ‘How are you getting on with the revised DRC workings? Is it possible these could be sent across ahead of my 4.30pm meeting’) read ‘… as discussed, we are comfortable revising this as discussed this morning. See attached’

ii) The attachment comprised the calculation by which JLL had arrived at a DRC valuation of £74.4m. That calculation

(1) Still used a cost per seat of £3,000

(2) Still used a capacity of 33,455

(3) Assumed an economic life for the stadium of 60 years, applied a maintenance adjustment of a further 5 years ‘due to good cap-ex’, and so assumed an adjusted remaining economic life of 43 years

(4) Assessed depreciation at 28.3% and functional obsolescence at 5%

85) Without hearing from Mr Holt it is impossible to be certain exactly

a) How the ‘JLL email’ sent to the EFL on 26 June 2018 came to be sent as it was, or

b) How the attachment sent to the EFL on 26 June 2018 came to be labelled as it was.

The strong suspicion is however that

(1) the wording of/figures in JLL’s 21 June 2018 email to the Club was changed by Mr Holt before he forwarded the same to the EFL,

(2) the attachment to JLL’s 25 June 2018 email was relabelled by Mr Holt to make its nomenclature consistent with the other attachments sent by JLL on 21 June 2018, and

(3) Mr Holt replaced the actual attachment to JLL’s 21 June 2018 email with that ‘renamed’ attachment; it is difficult to conceive of any other sensible explanation.

This bit is gobsmacking- really??

Mr. Holt sounds quite important in this whole debacle- why was he not requested to provide evidence at this Hearing?

He's listed as Head of Finance at Derby- not exactly the Tea lady?

Quote

86) The question then becomes – so what? We consider below whether that conduct has any consequence for any of the Club’s procedural defences. However, that matter aside, our view is that the manipulation described above, if that is what it was, is irrelevant. The Club was perfectly entitled to discuss with JLL, and challenge JLL on, the initial figures that JLL provided on 21 June 2018. JLL was perfectly entitled to reconsider its initial figures in the light of such discussions. That is in all probability what happened, and what caused JLL to provide a revised DRC valuation figure to the Club on 25 June 2018. There is certainly no criticism to be made of JLL for providing that revised figure as it did. While it was unwise of Mr Holt to have manipulated JLL’s email – if that is what he did – it is unlikely in our view that the ‘manipulated email’ actually contained any view that JLL had not by then expressed to the Club, or that the ‘manipulated email’ was in fact misleading. Certainly the ‘manipulated email’ reflected the views set out in the 2018 JLL report.

That's an incredible conclusion to draw!! Really??

Quote

b) About the £1m rental valuation that the Club was purporting to apply – in particular, Mr Karran asked for a ‘numerical reconciliation of how the £4.1m reduces to £1m’.

Which were?

Quote

b) As regards the rental valuation, the Club provided additional information and calculations.

Which were?

This might explain it- and this is where the crucial non footballing commercial revenue kicks in. As I say you can't have it all ways!

Quote

89) At 16.45 Mr Karran acknowledged receipt of the additional information and informed the Club ‘Based on this [the information provided by the Club] I will be asking Shaun [Harvey] to review and sign off the Club’s P&S result in the morning. As a result, the Club’s P&S embargo has now been lifted’. The email concluded: ‘As previously discussed the result is based on the new stadium not operating a material part of the group’s operations and therefore not being consolidated into the P&S Result … I’m aware the Club may wish to review the £74.4m stadium sale price that the EFL has chosen to use for the purposes of the P&S Calculation and increase it to £81.1m for P&S submissions in future years’.

Shouldn't happen! Should not happen- DRC feels the best method, if DRC is £74.4m- putting aside the above increase of about 1/3 ie the £57m initial price then this remains for P&S and does not increase!

Quote

90) We were shown a ‘P&S Summary for Tad Detko, Director of Finance’ dated 3 July 2018

a) That had been prepared by Mr Karran following an initial review by him of the Club’s P&S Information (including his exchanges with the Club on 3 July 2018 above)

b) That was signed as having been ‘reviewed and agreed by Tad Detko’ on 3 July 2018. That Summary recorded

i) ‘Club happy for the EFL to use £74.4 at this stage’

ii) ‘Club has provided justification for £1m renal valuation based on days usage. This is not an issue for 2017/18 as no rental has been charged in this period. No further queries raised but clarified with the Club (Todd Holt on call on 3 July 2018) it may be revisited next year’

iii) ‘Signed TR1 attached’

iv) ’Final P&S result £(29,491)k’

v) ‘Club has fulfilled the P&S Requirement’

Why would you revisit the extra £6.7m?? Why. What was Shaun Harvey- and tbh his mates Detko and Karran- what were they up to?

Profits method is not so reliable I wouldn't have thought. DRC of at best, £74.4m seems more to me- though subsequent stuff talks about Price Per Seat, midrange, ranges of price etc. 

https://www.efl.com/siteassets/image/202021/general-news-images/efl-v-derby-county--decision.pdf

They did a lot more in-time monitoring and questioning than I gave them credit for a year and a half ago but they came to some bizarre conclusions, the EFL. DRC seems a favoured method, Rent should not drop off by £3m a season, that's two.

Edited January 9, 2021 by Mr Popodopolous

[Mr Popodopolous]

Found a secondary note on the non-payment or at least, late payment of wages too.

 

[Mr Popodopolous]

Further followup on Derby and wages.

HE is pretty reliable for Derby news. Percy I mean.

Tomorrow I might look at the one that got away- think we know which club I mean in recent times...

Edited January 9, 2021 by Mr Popodopolous

[Mr Popodopolous]

Well that's a shame but it shouldn't make any significant difference with the £39m loss limit?

Sounds like Derby were/are also under some kind of embargo- shouldn't be lifted so quickly IMO.

One of their better posters- G STAR RAM- is he forgetting so quickly the spike in amortisation forecast for 2019/20, the massive Projected losses in 2018/19, the fact sacking Cocu and probably hiring him probably not cheap as chips and the fact that even if wage bill came down, the Stadium Sale and leaseback profit disappears from the calculations after this season.

Quote

Last accounts were June 2018, even without accurate figures to hand, I think its reasonably obvious that we have offloaded some very high earners since then and replaced them with cheaper alternatives. 

Of course there is a difference between owning and leasing something but from a financial point of view it isnt going to be huge.

Obviously we no longer have the security of owning our ground but I dont think the Landlord has lots of options of what to do with the ground other than lease it to a football club.

There's also the small matter of whether the rent is too low for FFP in terms of arms length, fair market value etc- or if not, then whether the club should keep the commercial revenue that is not related to football? Otherwise from a structure POV and whether it counts, worthy of another Investigation potentially?

That said maybe I'm underestimating the wage reduction- some sites suggest that Waghorn wages eg are £7,800 per week?

Edited January 10, 2021 by Mr Popodopolous

[Mr Popodopolous]

Still, reading this- think you could make a case to put both Sheffield Wednesday AND Derby County under soft embargo this Transfer window.

Wages issue and no accounts at CH.

Quote

16 Clubs’ Financial Records

16 Clubs’ Financial Records

16.1  All Clubs shall keep their financial records in accordance with the provisions of The Football
Association Rules and The League may arrange for an inspection of all such books.

16.2  Each Club shall submit a copy of its Annual Accounts (as defined in Regulation 16.3 below) to The League, but in any event:

16.2.1  by no later than 1 March following the end of the financial year to which those Annual Accounts relate (in the case of a Championship Club); or

16.2.2  by no later than the date on which the Club is required to file its accounts at Companies House (in case of League One and League Two Clubs).

16.3  For the purposes of this Regulation 16, Annual Accounts means the annual accounts in respect of the Club’s most recent financial year (such accounts to be prepared and audited in accordance with applicable legal and regulatory requirements) together with a copy of the directors’ report for that year and a copy of the auditor’s report (if any) on those accounts.

16.4  If the Club considers it appropriate, or The League so requests, the Annual Accounts required to be submitted in accordance with Regulation 16.2 shall relate to the Group of which the Club is a member.

16.5  Where a Club relies on any statutory and/or regulatory exemptions such that the Annual Accounts are either abbreviated in nature or unaudited the Club shall within 14 days of any request provide to The League such additional information as The League deems appropriate. Any information request will ordinarily be limited to information that would be disclosed if the Club was required to prepare annual accounts under the provisions of Section 396 of the 2006 Act and The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as may be amended or replaced from time to time) other than the requirement to have an audit report prepared.

16.6  The League shall have the powers set out in Regulation 16.7 if:

16.6.1  the Club has failed to submit to The League the Annual Accounts as required by Regulation 16.2;

16.6.2  the Club has failed to submit to The League Annual Accounts for the Group where requested by The League in accordance with Regulation 16.4; and/or

16.6.3  the Club has failed to submit to The League any additional information as required by Regulation 16.5,

to The League’s satisfaction.

16.7  The powers referred to in Regulation 16.6 are:

16.7.1  to require the Club to provide such further information as The League shall determine and for such period as it shall determine; and

16.7.2  subject the Club to a registration embargo such that it shall not be permitted to register any Player with that Club without the prior written consent of The League until such time as the breach identified by Regulation 16.6 has been rectified in its entirety to The League’s satisfaction.

16.8  Regulations 16.1 to 16.4 and Regulations 16.20 to 16.22 inclusive shall apply to all Clubs. Regulations 16.5 to 16.7 inclusive shall not apply to Championship Clubs and the remainder of this Regulation 16 shall apply to Championship Clubs in substitution of Regulations 16.5 to 16.7. To enable The League to apply Regulations 16.21 and 16.22 to all Clubs (as opposed to just Championship Clubs) each reference to ‘Championship Club’ in Regulations 16.16 to 16.20 inclusive shall be deemed to read ‘Club’ for that purpose (but not otherwise).

Should be adequate for at least a soft embargo IMO. Maybe a full one but certainly a soft one. Possible they have submitted to the League but not Companies House or their fans/the public via their sites of course.

Aware Derby WERE under an embargo but this being a 2nd offence ie wages wise, the FFP issue, sadly probably can't do it for this reason but their nonsensical claims about an EFL vendetta against them and Mel Morris, but more realistic grounds include the lack of accounts- seems grounds worth exploring to me. Same for Sheffield Wednesday.

Incidentally, did poor old Macclesfield not get referred to Disciplinary Commissions for wage issues? Refer them both, hopefully. Maybe it needs to hit a certain threshold though, ie number of offences?

Edited January 10, 2021 by Mr Popodopolous

[Hxj]

On 08/01/2021 at 19:19, Mr Popodopolous said:

Agree @Hxj like that argument a lot with respect to Sheffield Wednesday and their accounts.

Maybe that is the precise or at least the broad nature of the delay to their accounts- could the EFL be pushing back with that very line of argument about inclusion of it in 2018/19 accounts? Be it at Companies House or for FFP purposes.

I'd expect the EFL under Rick Parry to take that stance for sure or explore it- unsure about under Harvey?

 

I would take the line that these are the submitted accounts for 2018 AP and so they fall within regulation 1.1.3 of the FFP regulations.

Accounts can be restated where there is a material omission or mis-statement in those accounts, materiality is relevant but the stadium transfer is clearly material.

FRS 102 states that an error that needs accounts to be restaed arise as follows: 

‘Omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:

(a) Was available when financial statements for those periods were authorised for issue and

(b) Could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.’

In the SWFC case the auditor clearly decided that the adjustment in respect of the stadium sale should be made and therefore the informatiom was both available and taken into account, it was hardly hidden or not discussed.

All in all that makes it tricky to argue that a prior year adjustment is appropriate, in which case SWFC may well have stuffed themselves.

 

[Mr Popodopolous]

On 10/01/2021 at 20:25, Hxj said:

I would take the line that these are the submitted accounts for 2018 AP and so they fall within regulation 1.1.3 of the FFP regulations.

Accounts can be restated where there is a material omission or mis-statement in those accounts, materiality is relevant but the stadium transfer is clearly material.

FRS 102 states that an error that needs accounts to be restaed arise as follows: 

‘Omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:

(a) Was available when financial statements for those periods were authorised for issue and

(b) Could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.’

In the SWFC case the auditor clearly decided that the adjustment in respect of the stadium sale should be made and therefore the informatiom was both available and taken into account, it was hardly hidden or not discussed.

All in all that makes it tricky to argue that a prior year adjustment is appropriate, in which case SWFC may well have stuffed themselves.

 

Very well explained, thanks. I'd agree with that! Fans on their forum and even Kieran Maguire though seemed to think it just goes into the next season- but I suppose the club might try to argue that 'If it doesn't move, then we pass FFP to 2018'- definitely think it would be hard for the club to justify though, given the information was as you say available and taken into account- but the auditor did seem to suggest that he shouldn't have approved of the transaction, but would have to read the written reasons again. They might also argue that EFL agreed in principle and even Shaun Harvey telling them to get it done quickly, to appear credible, should be mitigating factors.

Imagine that though, docked 12- then reduced to 6- points and the stadium sale being non-applicable due to their own errors/actions- failings in any case. Would be fantastic!

D

Edited January 11, 2021 by Mr Popodopolous

[Mr Popodopolous]

Now then, was going to look at 'one that got away' before and here it is.

Aston Villa.

As we know, they sold the stadium, got HS2 money and got away and did this in the third and final year of Parachute Payments.

Using best estimates of allowable costs, and losses- in the consolidated (NSWE UK, previously Recon Group) accounts:

2016/17

£14.5m Loss- Allowable costs not unreasonably for a club of their size, seemed to be about £11m. FFP loss about £3m.

2017/18

£36.069m Loss- Allowable costs around £15m for the season- FFP loss about £21,069m?

Seemed to be about £3m in exceptional operating Income- if HS2 that needs looking into further, but maybe it was carpark sale or something? They were in a bit of a state in summer 2018 with FFP the least of their concerns...

2018/19

This is where it gets interesting.

£68.884m Loss- Allowable costs around £13m for the season.

HOWEVER:

INCLUDED in that loss, was:

£30m due to Lerner that wasn't paid by Xia if promotion gained within 3 seasons- presumably that was so Xia could get it cheaper, to cut a deal?

£15.808m in Promotion Bonuses- normal enough.

Loss down to £23.076m that's before the allowable costs, so that's around £10m for the season in FFP.

This loss also included about £14.5-15m in Parachute Payments plus £10.598m in Profit on Player Disposal.

We therefore have say £31m in 2 year FFP losses. What happens if Aston Villa had lost? Well, given the losing side is purported to get the gate receipts from Wembley let's add another £3.5m to their Revenue and by the same token, Wyness and Bruce sacked, Purslow comes in, so does Smith- Brentford compensated- let's add that while counted for FFP as non recurring costs that won't do so for next season- say £3.5m again.

Edited January 12, 2021 by Mr Popodopolous

[Mr Popodopolous]

However...the bottom line is that you need to get that FFP loss down in 2019/20 to £8m. The following variables will now kick in...I assume that as said the executive changes knock £3.5m off the recurring cost base but again by the same token, that £3.5m in Gate Receipts won't be replicated when forecasting the following season.

1. Villa Park- Profit on Disposal- £36.374m.
2. Exceptional Operating Income in the form of what was presumably HS2- £14.494m.
3. Parachute Payments down to Zero- £14.5m lopped off.
4. Player Sales- Well of course this can be replicated and maybe built on but given these things start at zero...? £10.598m.
5. Amortisation increase on January signings- they signed for combined £9.9m fee according to reports, in January- 4.5 year deals, basic Maths suggests an increase of £1.1m in each full season.

On the Parachute Payments side, I am unsure but if Solidarity Payments replace Parachute Payments the fall may 'only' be £9-10m, the net fall that is.

Your challenge, with Revenue falling by approaching £29m, and Profit on Disposal by £36.374m and £10.598m respectively, is to keep within FFP. The EFL would've had some great fun designing a Business Plan I expect!

Players such as Mings, El Ghazi, Abraham- these 3 in particular, surely would not have returned. I suspect your FFP losses would have been £9.5m in this scenario.

A £60-70m and maybe more, FFP hole- makes Birmingham's Business plan look like chicken feed- EFL would have been loving it I expect! Not sure how wildly expensive loans for Tuanzebe or Hause would have been though, so different matter.

I know I would have been, if in a position of power.

Glad though I am at Derby's travails, I wonder what would have been better- EFL tackling Aston Villa over this hole or Derby being in their current position- the most ideal of all would have been West Brom or Leeds winning the playoffs that year as it turned out though!

Edited January 12, 2021 by Mr Popodopolous

[Mr Popodopolous]

It maybe one idiot but I really do find Aston Villa/their fans rather irksome.

Hope they become QPR mk. 2 and then some.

Edited January 12, 2021 by Mr Popodopolous

[Busterrimes]

Sky Sports reporting that Derby still not paid players for December as takeover is delayed and they have cash flow issues.

[Mr Popodopolous]

Wow, that's unexpected! I assumed it would roll through any day now, well any day from Sunday onwards.

John Percy- who seems reliable on Derby matters- also corroborates this.

Might also add, seeking a third loan from MSD. Well Pride Park or perhaps the lease on Pride Park is deemed security- and then the Training Ground.

Now, a third eh? In addition, those Gabay loans/charges are also still showing at Companies House on the relevant companies as it goes.

I'd be surprised if MSD charge a low rate of interest, especially in these times- but who knows?

Edited January 13, 2021 by Mr Popodopolous

[View from the Dolman]

17 minutes ago, Mr Popodopolous said:

Wow, that's unexpected! I assumed it would roll through any day now, well any day from Sunday onwards.

John Percy- who seems reliable on Derby matters- also corroborates this.

Might also add, seeking a third loan from MSD. Well Pride Park or perhaps the lease on Pride Park is deemed security- and then the Training Ground.

Now, a third eh? In addition, those Gabay loans/charges are also still showing at Companies House on the relevant companies as it goes.

I'd be surprised if MSD charge a low rate of interest, especially in these times- but who knows?

Kieran Maguire report that Southampton's loan from MSD is at 9.14%: https://twitter.com/KieranMaguire/status/1349066890069635072

Perhaps that can be expected to be higher for a Championship club which might be seen as slightly less financially secure without Premier League TV rights (or the security of parachute payments) behind it.

[AnotherDerbyFan]

On 10/01/2021 at 16:09, Mr Popodopolous said:

Well that's a shame but it shouldn't make any significant difference with the £39m loss limit?

Sounds like Derby were/are also under some kind of embargo- shouldn't be lifted so quickly IMO.

One of their better posters- G STAR RAM- is he forgetting so quickly the spike in amortisation forecast for 2019/20, the massive Projected losses in 2018/19, the fact sacking Cocu and probably hiring him probably not cheap as chips and the fact that even if wage bill came down, the Stadium Sale and leaseback profit disappears from the calculations after this season.

There's also the small matter of whether the rent is too low for FFP in terms of arms length, fair market value etc- or if not, then whether the club should keep the commercial revenue that is not related to football? Otherwise from a structure POV and whether it counts, worthy of another Investigation potentially?

That said maybe I'm underestimating the wage reduction- some sites suggest that Waghorn wages eg are £7,800 per week?

We're currently under a soft embargo due to not paying the wages. Once paid, the embargo should be lifted.

It appears like Covid has helped us pass P&S for 19/20 and 20/21 due to the 4 year period. I wouldn't bet against P&S losses for the 18/19 and 19/20 seasons to be far off £25m and £36m respectively. I recall the Decision Document stated £29.5m for 18/19, which wouldn't include the playoffs or the Lampard compensation. There's no way we would have stayed within the P&S limits for the 2020 period and 2021 would have been difficult, requiring a lot more academy graduates being sold. With the high earners off the wage bill, I have no concerns about the 2022 period though.

I'll be surprised if Waghorn is outside the £15-20k range. You look at the squad list beyond this season and the only high earner remaining will be Lawrence. Bielik, Jozwiak and Marriott the next highest earners, but unlikely to be on much more than £15k

[Mr Popodopolous]

7 hours ago, AnotherDerbyFan said:

We're currently under a soft embargo due to not paying the wages. Once paid, the embargo should be lifted.

It appears like Covid has helped us pass P&S for 19/20 and 20/21 due to the 4 year period. I wouldn't bet against P&S losses for the 18/19 and 19/20 seasons to be far off £25m and £36m respectively. I recall the Decision Document stated £29.5m for 18/19, which wouldn't include the playoffs or the Lampard compensation. There's no way we would have stayed within the P&S limits for the 2020 period and 2021 would have been difficult, requiring a lot more academy graduates being sold. With the high earners off the wage bill, I have no concerns about the 2022 period though.

I'll be surprised if Waghorn is outside the £15-20k range. You look at the squad list beyond this season and the only high earner remaining will be Lawrence. Bielik, Jozwiak and Marriott the next highest earners, but unlikely to be on much more than £15k

Yes, sounds about right. My personal view on clubs who do not pay the wages is that a punishment needs to stick- lifting as soon as paid is just weak, weak, weak. I also believe clubs should be soft embargoed for not submitting accounts to Companies House in a timely manner, but unlike the first bit, this bit can be lifted fairly swiftly thereafter. There are two Championship clubs who are well overdue in this respect.

Macclesfield got docked points after all for wages- granted this was longer, non-fulfilment of fixtures but I really think there needs to be stronger, automatic punishments across the board for this kind of thing.

I mean- 4 year period but my reading is this?

1. 2017-18- Year 1
2. 2018-19- Year 2
3. 2019 and 2020-21- Added then halved- Year 3. With Covid losses of course excluded/factored in.

Presumably then, you would get in 2021/22:

1. 2018-19- Year 1
2. 2019-20 and 2020-21 Added then halved, with Covid losses of course excluded/factored in. Year 2.
3. 2021/22- Year 3.

If not, you would get some very bizarre P&S outcomes, with some clubs benefiting unduly and some clubs unable to fully utilise their 2018/19 profits! Not even sure it should have been averaged out plus Covid losses, surely Covid losses alone and the usual process up to 2019/20 would have sufficed.

Going to dive back into the Written Reasons again now, to try and get a handle on P&S losses over a given period- and how it might look moving forward.

Quote

69) On 12 April 2018 the EFL wrote to the Club raising various queries about the Club’s P&S Information. The Club responded on 25 April 2018, enclosing a revised P&S Appendix 1 Form That revised P&S Appendix 1 Form recorded 

a) A loss before tax for T-2 (year to 30 June 2016) of £14,725,000 with Adjusted Earnings Before Tax of (-£15,271,000)

b) A loss before tax for T-1 (year to 30 June 2017) of £7,873,000 with Adjusted Earnings Before Tax of (-£4,686,000)

c) A forecast loss before tax for T (year to 30 June 2018) of £27,445,000 with Adjusted Earnings Before Tax of (-£23,970,000)

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus still £50,043,000, but its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 had become (-£43,927,000). That aggregate figure for Adjusted Earnings Before Tax had thus become a figure in excess of the LLT and the ULT.

At this time, they appeared to have been using the club specific accounts throughout.

However:

Quote

81) On 28 June 2018 the Club did indeed sent a further revised P&S Appendix 1 form together with various other P&S Information. That further revised P&S Appendix 1

a) Continued to record a loss before tax for T-2 (year to 30 June 2016) of £14,725,000 with Adjusted Earnings Before Tax of (-£15,271,000)

b) Recorded a loss before tax for T-1 (year to 30 June 2017) of £20,575,000 with Adjusted Earnings Before Tax of (-£13,948,000)

c) Recorded a forecast loss before tax for T (year to 30 June 2018) of £55,724,000, but recorded Adjusted Earnings Before Tax for T of +£6,737,000.

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £91,024,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was thus (-£22,482,000). That aggregate figure for Adjusted Earnings Before Tax was thus in excess of the LLT but below the ULT.

As we can see, this is in line or more in line with the Consolidated Accounts. Use of this would appear to be the correct approach here. Although the Projected Accounts had quite the overshoot with respect to losses- assuming this was before stadium signed off.

Quote

That Summary recorded

i) ‘Club happy for the EFL to use £74.4 at this stage’

ii) ‘Club has provided justification for £1m renal valuation based on days usage. This is not an issue for 2017/18 as no rental has been charged in this period. No further queries raised but clarified with the Club (Todd Holt on call on 3 July 2018) it may be revisited next year’

iii) ‘Signed TR1 attached’

iv) ’Final P&S result £(29,491)k’

v) ‘Club has fulfilled the P&S Requirement’

Putting aside the valuation debates, I am assuming iv) would be the final 3 year P&S result inclusive of stadium, Rowett compensation and playoff income to June 2018.

Quote

That Appendix

a) Recorded a loss before tax for T-2 (year to 30 June 2016) of £14,725,000 with Adjusted Earnings Before Tax of (-£15,271,000)

b) Recorded a loss before tax for T-1 (year to 30 June 2017) of £20,575,000 with Adjusted Earnings Before Tax of (-£13,948,000)

c) Recorded a forecast loss before tax for T (year to 30 June 2018) of £55,724,000 with Adjusted Earnings Before Tax for T of (-£272,000).

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £91,024,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was thus (-£29,491,000). That aggregate figure for Adjusted Earnings Before Tax was thus in excess of the LLT but below the ULT.

Though I suppose the difference between the agreed price and the final agreed price would improve matters by £6-7m. Seems like £5-6m, maybe £7m at times with respect to allowable costs in a typical season. Rowett compensation wouldn't have been anticipated at time of Projected Accounts?

Quote

From a review of the Club’s 2017/18 P&S Result the amendment to a sales price of £81.1 would result in 2017/18’s (T) adjusted profit being £6.428m (prior to final figures being submitted)

Seems right. An improvement of roughly £6-7m, maybe a bit more.

Quote

100) The Club did not in fact provide its 2019 P&S Submission by the 1 March deadline provided for in the P&S Rules, and on 6 March 2019 the Club was placed under embargo because of that nonprovision.

101) On 29 March 2019 – the date on which the Annual Report and Financial Statements of the Club and its parent for the year ended 30 June 2018 - the Club provided its 2019 P&S Submissions to the EFL. The P&S Appendix 1 form provided with the 2019 Submissions

a) Recorded a loss before tax for T-2 (year to 30 June 2017) of £20,575,000 with Adjusted Earnings Before Tax of (-£13,407,000)

b) Recorded a loss before tax for T-1 (year to 30 June 2018) of £1,146,000 with Adjusted Earnings Before Tax of £7,207,000

c) Recorded a forecast loss before tax for T (year to 30 June 2019) of £38,727,000 with Adjusted Earnings Before Tax for T of (-£31,517,000).

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £60,448,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was (-£37,717,000). That aggregate figure for Adjusted Earnings Before Tax was accordingly in excess of the LLT but below the ULT.

102) The embargo that had been placed on the Club due to non-provision/late provision of the 2019 Submission was lifted. However, an embargo remained in place to reflect the proximity of the aggregate figure for the Club’s Adjusted Earnings Before Tax to the ULT.

I assume they are still using the Parent as the basis for the P&S results. Which again is the right thing because Sevco 5112 represented the consolidated accounts.

Quote

106) Further queries – including what the parties described as ‘the stadium valuation question’ – continued to be addressed in correspondence during April, May and June 2019. All the while the embargo remained in place. On 11 July 2019 the EFL wrote to the Club

a) Acknowledging that, in light of the receipt by the Club of substantial compensation following the departure of its first team manager and staff to Chelsea, the Club’s 3 year aggregate figure for Adjusted Earnings Before Tax was ‘circa £37.1m’

b) Explaining that even though that figure involved a £3.1m ‘sensitivity in relation to stadium rent for the 2018/19 season that the EFL and Club are still in ongoing discussions over’, even with that sensitivity the Club’s forecast result fell within the ULT

Those varied bolded bits suggest that the compensation was received in, or moved into 2018/19? 3 year aggregate figure for Adjusted Earnings before Tax fell by £617,000. No mention of the playoff final- but Compensation was reported at £4m or thereabouts IIRC.

Rent at £1.1m? £4.16m per season seems fairer by far for a transaction of that size. Regardless, I wonder if that £3.1m sensitivity pushed up the Forecast losses and these would therefore drop by the same amount at time of resolution.

Quote

59) For completeness, we record that there was discussion about the Club’s approach to amortisation between the Club and the EFL in April and May 2019:

a) In April 2019, as part of the process of reviewing the Club’s 2019 P&S Submission, the EFL wrote to the Club with various queries. Question 17 was in the following terms: 

‘Can you please explain the variances in Player related amortisation charges from £6.5m in 2017/18 down to £4.6m in 2018/19 up to £25.1m in 2019/20? As part of this, please explain how the charge reduces from £3.3m in the 6 months to December 2018 down to £1.2m in the 6 months to June 2019?

We see a huge spike into 2018/19 above. I appreciate wages will have been down too of course.

The small reconciliation in the year doesn't interest me too much, Derby would have been just about within P&S anyway IMO.

[Mr Popodopolous]

Based on these figures we therefore have what we know- the 3 years to 2019:

Quote

• LOSS- £13,407,000
• PROFIT- £7,207,000
• LOSS- £31,517,000

3 year loss at this stage- 2 real, one projected- £37,717,000.

The updated and amended version in July 2019- so after the accounting Period in question had concluded, knocked this down by £617,000. Though the compensation and playoff issue seem incomplete?

This loss then drops off the cycle and is replaced by:

Quote

• PROFIT- £7,207,000
• LOSS- £30,900,000
• ALLOWABLE LOSS NET OF ALLOWABLE COSTS AND LATTERLY COVID- £15,307,000

This then morphs somewhat- some clubs surely got unbelievably lucky:

Quote

• PROFIT- £7,207,000
• LOSS- £30,900,000
• ALLOWABLE AVERAGED LOSS- £15,307,000- before halving, it's aggregated at £30,614,000

Let's go with your figures though:

Quote

• PROFIT- £7,207,000
• LOSS- £24,900,000
• LOSS- £35,200,000

This is approximating your not far off figures- not far off £25m and £36m respectively.

This turns into...

Quote

• PROFIT- £7,207,000
• LOSS- £24,900,000
• HALF OF £35,200,000

Bit of a tight rope this season! Let's assume once Covid etc, a breakeven as a couple of posters on DCFCFans seem to think.

As for moving into 2022, assuming this still halved?

Quote

• LOSS- £24,900,000
• LOSS- £17,600,000
• P&S PROFIT NEEDED- £3.5m.

This is assuming the figures in the IDC thing are wrong, ie the £30m loss for 2019. Does the amortisation drop off a cliff in 2020/21? We know Rooney was on £100,000 a week but that £80,000 a week was put into the income kitty by 32Red, IIRC. Bieilk- similar £20k per week, less? Clarke loan- less in the case of the latter I'd surmise.

Edited January 14, 2021 by Mr Popodopolous

[Mr Popodopolous]

G STAR RAM does still not appear to get that for FFP they use the Holding Company accounts. Or the Group Accounts.

Sensibly too, it gives the full picture- which the club accounts in isolation just would not. FFP aside, these would necessarily incur greater costs than the club in isolation.

Edited January 14, 2021 by Mr Popodopolous

[Hxj]

 

In any season if a club returns a profit for FFP purposes there are no further tests.

So any club which makes an FFP profit of £1 in 2022 will automatically meet FFP regardless of performance in previous years.

[AnotherDerbyFan]

18 hours ago, Mr Popodopolous said:

Yes, sounds about right. My personal view on clubs who do not pay the wages is that a punishment needs to stick- lifting as soon as paid is just weak, weak, weak.

A harsher punishment due to unexpected takeover delays seems harsh to me. Mel was assured the takeover would complete on the 24th of December and the wage bill will be accounted for. If he knew he would have freed up some cash, but he didn't know so he didn't free it up. However, if an owner simply chooses not to pay the wages then that obviously required harsher punishment.

18 hours ago, Mr Popodopolous said:

I also believe clubs should be soft embargoed for not submitting accounts to Companies House in a timely manner, but unlike the first bit, this bit can be lifted fairly swiftly thereafter. There are two Championship clubs who are well overdue in this respect.

Seems to be in part due to the charges brought upon the two clubs by the EFL. I don't think it has a material impact on P&S submissions so does it really matter to the EFL?

18 hours ago, Mr Popodopolous said:

I mean- 4 year period but my reading is this?

1. 2017-18- Year 1
2. 2018-19- Year 2
3. 2019 and 2020-21- Added then halved- Year 3. With Covid losses of course excluded/factored in.

Presumably then, you would get in 2021/22:

1. 2018-19- Year 1
2. 2019-20 and 2020-21 Added then halved, with Covid losses of course excluded/factored in. Year 2.
3. 2021/22- Year 3.

If not, you would get some very bizarre P&S outcomes, with some clubs benefiting unduly and some clubs unable to fully utilise their 2018/19 profits! Not even sure it should have been averaged out plus Covid losses, surely Covid losses alone and the usual process up to 2019/20 would have sufficed.

I'm with you on the 2021 period but I assumed a move back to 3 years for 2022. I think the difference in P&S loss is only a couple of £million either way. Average AND Covid allowances is strange. There must be a reason for it?

18 hours ago, Mr Popodopolous said:

I assume they are still using the Parent as the basis for the P&S results. Which again is the right thing because Sevco 5112 represented the consolidated accounts.

The EFl will but for us who like to estimate the P&S losses is doesn't really matter if you use a correction value - something like an improvement of £7m from the group accounts or £3m worse than the club accounts over the 3 seasons.

18 hours ago, Mr Popodopolous said:

Those varied bolded bits suggest that the compensation was received in, or moved into 2018/19? 3 year aggregate figure for Adjusted Earnings before Tax fell by £617,000. No mention of the playoff final- but Compensation was reported at £4m or thereabouts IIRC.

Lampard officially joined Chelsea on the 4th of July. It's another of those in the first week of July which creeps into the previous accounting period for some reason - see Ince and Weimann(?) as examples in the past.

18 hours ago, Mr Popodopolous said:

Rent at £1.1m? £4.16m per season seems fairer by far for a transaction of that size. Regardless, I wonder if that £3.1m sensitivity pushed up the Forecast losses and these would therefore drop by the same amount at time of resolution.

I'm still surprised the EFL didn't push back on this one during the hearing. It would have been easier to win that than the stadium fee or amortisation charges.

18 hours ago, Mr Popodopolous said:

We see a huge spike into 2018/19 above. I appreciate wages will have been down too of course.

The small reconciliation in the year doesn't interest me too much, Derby would have been just about within P&S anyway IMO.

Yep. That's mostly due to the group of players who signed extensions in 18/19, only to leave in the very early part of 19/20, the fault with our amortisation policy - Johnson, Butterfield, Blackman, Anya and Huddlestone all left on frees in the 19/20 period after costing a combined c£20m.

18 hours ago, Mr Popodopolous said:

Does the amortisation drop off a cliff in 2020/21? We know Rooney was on £100,000 a week but that £80,000 a week was put into the income kitty by 32Red, IIRC. Bieilk- similar £20k per week, less? Clarke loan- less in the case of the latter I'd surmise.

I've estimated a drop to £15m in 20/21 (pending no extensions). This could decrease by almost half if Wisdom and Waghorn sign extensions though. Dropping again to £9m in 21/22 (pending no extensions), made up mostly from Lawrence and Marriott. Only Bielik and Jozwiak of significant book value beyond that, with their contracts currently set to expire in 2024.

Rooney's wages would be a complete guess. One source suggests the following for other players above £10k:

• Lawrence - £30k
• Davies - £25k
• Wisdom - £23k
• Clarke - £22k
• Carson - 20k
• Malone - £20k
• Bielik - £20k
• Marriott - £18k
• Jozwiak - £15k
• Byrne - £11k

It's hard to argue against those figures being too far out. Only those in bold are currently set to stay beyond this season. te Wierik was another supposedly in the £10k+ camp, but he's on his way back to the Netherlands. Marriott has also returned to Sheffield Wednesday on loan who will pick up most of his wages. Holmes off to Huddersfield for £1m and a small saving off the wage bill.

We'll have a tiny squad for next season at the moment. Marshall, Roos, Byrne, Evans, Forsyth, Bielik, Shinnie, Lawrence, Jozwiak, Ibe and Marriott are the only players with more than a season and a bit of experience to their names.

I don't think anyone can use the wage bill as a stick to beat the club with anymore. Same for transfers where fees received exceed fees going out.

[Mr Popodopolous]

5 hours ago, AnotherDerbyFan said:

A harsher punishment due to unexpected takeover delays seems harsh to me. Mel was assured the takeover would complete on the 24th of December and the wage bill will be accounted for. If he knew he would have freed up some cash, but he didn't know so he didn't free it up. However, if an owner simply chooses not to pay the wages then that obviously required harsher punishment.

Seems to be in part due to the charges brought upon the two clubs by the EFL. I don't think it has a material impact on P&S submissions so does it really matter to the EFL?

I'm with you on the 2021 period but I assumed a move back to 3 years for 2022. I think the difference in P&S loss is only a couple of £million either way. Average AND Covid allowances is strange. There must be a reason for it?

The EFl will but for us who like to estimate the P&S losses is doesn't really matter if you use a correction value - something like an improvement of £7m from the group accounts or £3m worse than the club accounts over the 3 seasons.

Lampard officially joined Chelsea on the 4th of July. It's another of those in the first week of July which creeps into the previous accounting period for some reason - see Ince and Weimann(?) as examples in the past.

I'm still surprised the EFL didn't push back on this one during the hearing. It would have been easier to win that than the stadium fee or amortisation charges.

Yep. That's mostly due to the group of players who signed extensions in 18/19, only to leave in the very early part of 19/20, the fault with our amortisation policy - Johnson, Butterfield, Blackman, Anya and Huddlestone all left on frees in the 19/20 period after costing a combined c£20m.

I've estimated a drop to £15m in 20/21 (pending no extensions). This could decrease by almost half if Wisdom and Waghorn sign extensions though. Dropping again to £9m in 21/22 (pending no extensions), made up mostly from Lawrence and Marriott. Only Bielik and Jozwiak of significant book value beyond that, with their contracts currently set to expire in 2024.

Rooney's wages would be a complete guess. One source suggests the following for other players above £10k:

• Lawrence - £30k
• Davies - £25k
• Wisdom - £23k
• Clarke - £22k
• Carson - 20k
• Malone - £20k
• Bielik - £20k
• Marriott - £18k
• Jozwiak - £15k
• Byrne - £11k

It's hard to argue against those figures being too far out. Only those in bold are currently set to stay beyond this season. te Wierik was another supposedly in the £10k+ camp, but he's on his way back to the Netherlands. Marriott has also returned to Sheffield Wednesday on loan who will pick up most of his wages. Holmes off to Huddersfield for £1m and a small saving off the wage bill.

We'll have a tiny squad for next season at the moment. Marshall, Roos, Byrne, Evans, Forsyth, Bielik, Shinnie, Lawrence, Jozwiak, Ibe and Marriott are the only players with more than a season and a bit of experience to their names.

I don't think anyone can use the wage bill as a stick to beat the club with anymore. Same for transfers where fees received exceed fees going out.

  

That bit feels fair enough. However I do believe in fixed penalties as a rule of thumb. See Chansiri at Sheffield Wednesday- there is or has been a wage issue there. Not waiting on a takeover but simply late...for me that should mean sitting out the January window, with respect to incomings. Have they fulfilled their obligations to Monk and Pulis yet, I wonder?

In part perhaps, in Sheffield Wednesday's case however these reached a final resolution in early November 2020. No excuse IMO. Derby are still I suppose waiting for the EFL appeal to come through.

Maybe, maybe not- I'd like to see stronger Governance in general though and such a move would certainly tighten it. As an aside, Birmingham do release their Hong Kong Group accounts bang on time, FFP or no FFP. Perhaps there are harsher punishments for late submission out there?

It is odd. One or the other- if it does move back to a 3 year after averaging this time, it will mean that some clubs will benefit unduly- just to pick one club, we otoh might not because we wouldn't have had the 2017/18 drop off to utilise in full the 2018/19 profit of £10m plus allowable costs- to me, as we would stiill have had £25m from 2017/18 hanging over but with a new starting point of 2019/20 bypassing the £10m profit! That's utterly illogical, to me the fairest solution would be for that 2019/20 and 2020/21 combination to stay on the books until such time as it has expired- so:

Quote

• 2017/18, 2018/19 and Combined 2019/20 and 2020/21
• 2018/19, Combined 2019/20 and 2020/21 and 2021/22.
• Combined 2019/20 and 2020/21, 2021/22 and 2022/23.

Finally- 2021/22 onwards to resume the new 3 year period, with whatever results obtained in that year and 2022/23 forming the base.

Well the ones for 2016/17 did not. That P&S difference was about £6m- for that year alone. Using the club accounts in isolation would confer a clear advantage in a P&S context- or would have done. That could have also been down to the fact that one was 10 month accounts and one was 12 month accounts. I think similar for 2017/18- though where the hell the £55m projected Group Accounts loss came from I'm struggling with! I know you knock off £40m for the ground profit but the final losses for that year were £1.1m or thereabouts! Rowett compensation too?

The Lampard compensation- was it staggered? Maybe a small amount then, the rest in 2019/20? £4m was reported in the Press, that suggested compensation in the Written Reasons was well short of that. Had Derby not yet factored in playoff final revenue too by July 2019? Can only assume not.

They're quite convenient, they help to kick the can down the road a bit by making the present look that bit better- but again it could also be due to the 10 month Reporting Period for Sevco 5112 and the 12 month for the club for the club to the end of June 2017.

I think there was still an argument to be had over the Stadium- but hard to prove. Messenger however was shocking- some of the examples he chose were a total joke, yet comparable grounds from period, from similar bits of the world albeit with Land Value being higher in Derby, comparable capacities- he chose Morecambe and a Rugby League Stadium, with standing capacity either in part or full to name 2?? Amortisation, we'll see- one report did suggest the EFL have put in new evidence though it's unclear tbh. Back on Messenger, am I right from memory that he also didn't go to Pride Park itself for the valuation but instead relied on modelling or somesuch? Amateur! I should also add I've looked at some comparables in terms of relatively recent valuations, albeit unsure all were under DRC- and it feels toppy, £81.1m.

Don't see what they would have hoped to have gained from a small discrepancy in amortisation value, would it even have materially impacted P&S, only felt like a couple of million?

Would it have accelerated losses into 2019/20 then, or decelerated into 2018/19? It's difficult to tell given those short extensions and the impact.

A drop to £15m is still hefty, considering that losses in 2018/19 as per the Written Reasons were quite a lot despite a fairly low amortisation charge of £4.6m being stated!

Wisdom and Waghorn signing extensions would kick the can down the road, would reduce the losses in that particular season but knock headroom off the following one. I hope no club gets any leeway for P&S as a result of these reforms, that's for sure.

Of those, Malone's wages being covered in part or full by Millwall surely? Carson's certainly in full by Man City- Holmes, £1m minus remaining Net Book Value. Plus Marriott and Te Wierik as you stated.

Remember though, that is only part of the package- lots out of contract yes but losses overhanging from prior seasons make it difficult to recruit competitively. Might be reliant on a bit more youth as well though? I hope the EFL give no leeway to clubs.

Net spend is a red herring though, wage bill is a better indicator but that seems to be coming down. Net spend with that amortisation model doesn't seem the best indicator.

As an aside, how much do we think the Cocu sacking might have cost? Has Keogh yet resolved his issue, I think if not he should still pursue it personally.

Edited January 15, 2021 by Mr Popodopolous

[Mr Popodopolous]

7 hours ago, Hxj said:

 

In any season if a club returns a profit for FFP purposes there are no further tests.

So any club which makes an FFP profit of £1 in 2022 will automatically meet FFP regardless of performance in previous years.

Seems complex- however my interpretation was that if T-1 and T-2 return a profit for P&S/FFP purposes then there are no further tests.

Lose £3m in T-2, but Profit £3m and £1 in T-1= a net profit? No further tests. Was reading them a bit earlier but not in great depth.

[Mr Popodopolous]

In other good news...

This is pre-emptive EFL measures to help clubs walk the P&S tightrope. Why they didn't do this so much before, I'm unsure- but it seems like the EFL are now!

I am assuming it would be or have to be within certain wages/fees/loan fees.

Edited January 15, 2021 by Mr Popodopolous

[AnotherDerbyFan]

 

18 hours ago, Mr Popodopolous said:

The Lampard compensation- was it staggered? Maybe a small amount then, the rest in 2019/20? £4m was reported in the Press, that suggested compensation in the Written Reasons was well short of that. Had Derby not yet factored in playoff final revenue too by July 2019? Can only assume not.

I'll be surprised if it is staggered as I'm struggling to think of an instance this has happened in the past for any club. With the Final being the end of May, I would have expected that money to be accounted for by July.

18 hours ago, Mr Popodopolous said:

I think there was still an argument to be had over the Stadium- but hard to prove. Messenger however was shocking- some of the examples he chose were a total joke, yet comparable grounds from period, from similar bits of the world albeit with Land Value being higher in Derby, comparable capacities- he chose Morecambe and a Rugby League Stadium, with standing capacity either in part or full to name 2??

I don't doubt the EFL could have put a much stronger case forward if that chose a competent expert. With the EFL not appealing this part of the charge then I think this is the end of it.

18 hours ago, Mr Popodopolous said:

Amortisation, we'll see- one report did suggest the EFL have put in new evidence though it's unclear tbh.

I thought the rules prevented the submission of new evidence, instead only appealing the decision based on the evidence already provided.

18 hours ago, Mr Popodopolous said:

Back on Messenger, am I right from memory that he also didn't go to Pride Park itself for the valuation but instead relied on modelling or somesuch? Amateur! I should also add I've looked at some comparables in terms of relatively recent valuations, albeit unsure all were under DRC- and it feels toppy, £81.1m.

Maybe asked a friend/colleague (who visited a while back) for his opinion who described our facilities as "basic".

18 hours ago, Mr Popodopolous said:

Don't see what they would have hoped to have gained from a small discrepancy in amortisation value, would it even have materially impacted P&S, only felt like a couple of million?

The club's amortisation policy requires a review every 6 months (iirc). If the review says the change is required...

18 hours ago, Mr Popodopolous said:

Would it have accelerated losses into 2019/20 then, or decelerated into 2018/19? It's difficult to tell given those short extensions and the impact.

The extensions to Butterfield, Johnson and Blackman? It would have pushed a reasonable chunk of losses into 19/20.

If my understanding of the policy is correct... An example would be signing a player for £5m on a 5 year contract. £500k amortisation a year for the first 4 years with the rest £3m in the final year. Am extension in that final year reduces that amortisation in the 5th year to £500k, with £2.5m in the 6th year. It may not be 10% per year in the actual policy but it helps illustrate the point.

18 hours ago, Mr Popodopolous said:

A drop to £15m is still hefty, considering that losses in 2018/19 as per the Written Reasons were quite a lot despite a fairly low amortisation charge of £4.6m being stated!

19/20 shot up to £25.1m. £15m is a reasonable drop from £25.1m, don't you think?

18 hours ago, Mr Popodopolous said:

Wisdom and Waghorn signing extensions would kick the can down the road, would reduce the losses in that particular season but knock headroom off the following one. I hope no club gets any leeway for P&S as a result of these reforms, that's for sure.

It does but it also helps keep the squad size at a healthy level. If we had to sign replacements then the same wages would be going put anyway. Don't think it'll make much P&S impact.

18 hours ago, Mr Popodopolous said:

Of those, Malone's wages being covered in part or full by Millwall surely? Carson's certainly in full by Man City- Holmes, £1m minus remaining Net Book Value. Plus Marriott and Te Wierik as you stated.

You'd hope so. Holmes was a £500-700k signing so a welcome profit on him.

18 hours ago, Mr Popodopolous said:

Remember though, that is only part of the package- lots out of contract yes but losses overhanging from prior seasons make it difficult to recruit competitively. Might be reliant on a bit more youth as well though? I hope the EFL give no leeway to clubs.

"A bit more youth". Any more youth and we'll be an U12 side

18 hours ago, Mr Popodopolous said:

Net spend is a red herring though, wage bill is a better indicator but that seems to be coming down. Net spend with that amortisation model doesn't seem the best indicator.

My point was more about doing things 'the right way', rather than looking at amortisation which indicates behaviour from the past.

18 hours ago, Mr Popodopolous said:

As an aside, how much do we think the Cocu sacking might have cost? Has Keogh yet resolved his issue, I think if not he should still pursue it personally.

I think the papers suggested around £4m. Doubt it'll be paid upfront . Knowing Cocu he would be happy enough with deferred payment given the financial situation at the club. Given we've allowed him to join MK Dons I'll be very surprised if it hasn't been resolved.

[Mr Popodopolous]

The FFP and general football finance news keeps on coming- saw a snippet that Reading were indeed under the restrictions I posted as well but QPR..

https://www.dailymail.co.uk/sport/football/article-9165339/QPR-CEO-Lee-Hoos-sends-letter-fellow-Championship-clubs-request-cut-42m-FFP-fine.html?

I remember I thought the 10 year Payment Plan would be a bit of a millstone around their neck in normal times but I don't see this one being approved tbh, by the other clubs! Doubt it should be either.

Edited January 20, 2021 by Mr Popodopolous

[Davefevs]

Unlucky Kentucky.

[Mr Popodopolous]

Indeed.

Don't do the crime, if you can't pay the fine!

Edited January 20, 2021 by Mr Popodopolous

[WarksRobin]