City release accounts - Ouch!

[Hampshire reds]

surprised steve has allowed this to happen.  he needs to get more involved and sort this mess out. 

[Simon bristol]

28 minutes ago, westonred said:

What still annoys me is why MA didnt sell Diedhiou 18 months ago when he was still a saleable asset. It was obvious at the time that Fam wasn't going to sign a new deal and run his contract down.  Maybe we could have got £1m for him but MA said that he was more value to us on the pitch rather than being sold. Well although £1m is peanuts in football terms these days, that money might have come in very handy. 

Yes, and also, if watford bid 8 million for massengo in the summer, who in their right mind would turn that down?

[The Bard]

1 hour ago, Simon bristol said:

Yes, and also, if watford bid 8 million for massengo in the summer, who in their right mind would turn that down?

I can't believe they bid that. Not even if it was actually £3 million + £5 million in add ons. 

[Monkeh]

1 hour ago, Simon bristol said:

Yes, and also, if watford bid 8 million for massengo in the summer, who in their right mind would turn that down?

A club who's best player is still under contract who feels the valuation didn't match its own

[Dredd]

6 hours ago, westonred said:

What still annoys me is why MA didnt sell Diedhiou 18 months ago when he was still a saleable asset. It was obvious at the time that Fam wasn't going to sign a new deal and run his contract down.  Maybe we could have got £1m for him but MA said that he was more value to us on the pitch rather than being sold. Well although £1m is peanuts in football terms these days, that money might have come in very handy. 

More annoying was that we got absolutely sweet fa value out of him on the pitch post January. 

[Davefevs]

Just now, Dredd said:

More annoying was that we got absolutely sweet fa value out of him on the pitch post January. 

I said at the time, the worst thing MA did was say he’d offered Fam a very good contract (one of the best ever) and then say everyone else would have to wait until the summer.

Absolute *******.

[Mr Popodopolous]

I have to say, bits of this worry me- re-read Gould's comments this morning and I hope we continue to do the right things but in recent times rules have been tightened, loopholes closed and potentially precedents set...

Quote

City estimate that, by next year, the pandemic has cost them around £30m in lost transfer revenue, based on previous earnings, a number that would have, in theory, moved them significantly closer to being in the black.

That doesn't strike me as an Covid FFP add back, sorry. Just doesn't- how do you prove and quantify for one?

Quote

Discussions are still being held to establish whether forecast transfer revenue can be included, along with ticket sales, as an “add-back”, with City to seek independent auditors and transfer experts to determine the full figure, which is deeply subjective.

Ticket sales yes, corporate revenue yes and some other related football specific revenue that we and all clubs had to forego due to Covid, of course- forecast transfer revenue?? No, clutching quite badly there IMO.

As for independent auditors and transfer experts...no I don't think that ultimately flies- there was a very important line in the Derby settlement that I feel could set a precedent.

Paragraph 21 and Paragraph 20 offers a bit of context.

It's about a specific issue- whether a Revaluation Reserve can mitigate losses after disposal- but unfortunately the line

Quote

"a matter of compliance with relevant accounting standards in the context of the EFL's Regulations"

This feels like it could be used for many issues, to cover a lot of bases.

Quote

However, with the majority of the Championship’s clubs to publish their accounts in the coming weeks, and substantial losses expected across the board, the EFL may be forced to further amend the system.

Then you have a serious problem because a) Reading were docked points in the amended 3 years to 2021 and b) Derby's settlement covered the 3 years to 2017, the 3 years to 2019 and the amended 3 years to 2021- you surely cannot then change that mid-stream.

Quote

In effect, by next year, a significant number of the division’s 24 clubs could be falling foul of Profit & Sustainability and therefore liable for points deduction, which harms not only the future of those clubs and the league, but the credibility of the domestic game.

“Are we blameless? Probably not,” Gould told Bristol Live. “Because we have spent quite a lot of money on transfers and our player salaries have gone up quite significantly over the last three or four years.

"That was all fine while there was a transfer market there to fund it. But now there isn’t, or at least there isn’t one the way that it was, that’s where we start falling foul of FFP.

I'm sorry it sounds unconvincing to me.

Quote

“Where the uncertainty is, to what extent will the EFL accept there has been a crash in the transfer market? We have this bow wave of costs that is coming year-on-year closer to the FFP element and with the loss of transfer income, there is not much we can do.

“There is some stuff we can do, but it’s whether or not we choose to: do we want to sell all our best players this summer? No. Do we want to try and convince the EFL that FFP is now useless because there’s been an act of God called Covid that has changed the entire market? Yes, we think there’s a good case for that.”

It has been amended though and the crucial test will be, what leeway was given to Reading and Derby in the agreed settlements? Was it merely losses of matchday revenue losses excluded, was it matchday revenue and corporate- was it matchday revenue, corporate and other football matters but excluding transfers? Amended in a) The averaging of 2019/20 and 2020/21 and exclusion of losses directly attributable to Covid.

It is also surely weakened by the following transfers during the Pandemic and the immediate aftermath...Watkins and Benrahma from Brentford, Cash from Nottingham Forest, Armstrong from Blackburn, Collins from Stoke- all 5 of these spring to mind but there are others? Brennan Johnson is also linked for big money and we don't even look at relegated clubs who have sold big as they are effectively PL players who have taken a step down.

Quote

The CEO has also indicated that, should it come down to it, the Robins may be more willing to stomach a points deduction rather than taking pennies in the pound for some of their best players.

The problem here is that he is not mentioning the unspoken details of P&S/FFP. I see where he is coming from but he is not mentioning...

1. The risk of a Soft Embargo.
2. The risk of a Hard Embargo.
3. Future Financial Information. This is whereby a club if they fall between lower and higher limits have to submit by April to the EFL, their projections for the following 2 seasons. When you join it all up it's very useful for monitoring purposes.
4. EFL Business Plans- see the Reading case as an example, they were docked 6 immediately and a further 6 might be added if they fall foul of any one of a range of requirements- but that 6 to 12 if it materialises won't mitigate against future charges etc. They also seemed to be working under restrictions last season and this summer it was 6 signings at £8.5k per week- of course they had a helper in Chelsea who sent them Rahman and Drinkwater very cheaply and Chelsea do help them out- but their player salary budget etc needs to fall to £16m next season.
5. Contract extensions- even these can become problematic if a club fall into the FFP quicksand. In 2018, it was reported that Birmingham were unable to renew Morrison and even struggling to renew certain players. In 2020, it was reported that Reading might have issues- we all know about Derby not being able to renew Marriott, because if the proposed extension falls outside of the wage allowance and a club are in that position, they have to go cap in hand to the EFL and it may well be rejected. Stoke even reported not being able to extend/offer a new contract to Nick Powell last April.
6. Budgets to ensure compliance in the present- Reading got 6 players on £8.5k per week per player, no loan fees, transfer fees and no contracts exceeding 12 months- Carroll they may or may not be able to renew, probably have to see what EFL say. Derby signed 4 players on £4.5k per week per player initially- no transfer fee, no loan fee, no permanent contracts exceeding 12 months, no loan contracts exceeding 6 months. In fact at one point the EFL were leaning towards a full embargo- see the Professional Standing Rule and although Derby had 19 players of Professional Standing ordinarily- the limit is 23- they had to field a load of kids vs Chorley a lot of whom got their one and only start, was due to a Covid outbreak a year back and the EFL said "Well you have over 23 players of one appearance or above so what you moaning about".

The thing about not selling players is also a problem...that could be part of a business plan to ensure compliance. Birmingham initially won their Che Adams case but this was overturned on appeal. There was a key part of the ruling which makes me wonder about the wisdom of refusing. Is it the sanction- or the ruling- that sets a precedent?

Ruling or Sanction that sets a precedent?

If anyone wishes to read the full appeal ruling etc. Note that

Quote

"the sanction in this case is no precedent of any kind for the type of sanction which will be appropriate normally in cases in which a club is found to have engaged in misconduct by failing to comply with an agreed budget under Regulation 16.20"

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

In this instance the follow up was to a points deduction for a breach the prior season- the EFL arguably botched the Business Plan case in 2019.

Ah yes. Regulation 16.20- I've banged on about this before but what exactly does it entail? FFP and other financial issues, or takeovers- it can be a bit of a catch all.

Falling foul of Regulation 16.20 can see a club lose a hell of a lot of autonomy. Basically the EFL can set budgets and such.

Anyway I don't believe that we will fall foul of FFP, we have started the process of hard decisions- taking a points deduction and entering the system, let alone contesting it with independent experts etc feels a bad idea to me.

[Monkeh]

3 minutes ago, Mr Popodopolous said:

I have to say, bits of this worry me- re-read Gould's comments this morning and I hope we continue to do the right things but in recent times rules have been tightened, loopholes closed and potentially precedents set...

That doesn't strike me as an Covid FFP add back, sorry. Just doesn't- how do you prove and quantify for one?

Ticket sales yes, corporate revenue yes and some other related football specific revenue that we and all clubs had to forego due to Covid, of course- forecast transfer revenue?? No, clutching quite badly there IMO.

As for independent auditors and transfer experts...no I don't think that ultimately flies- there was a very important line in the Derby settlement that I feel could set a precedent.

Paragraph 21 and Paragraph 20 offers a bit of context.

It's about a specific issue- whether a Revaluation Reserve can mitigate losses after disposal- but unfortunately the line

This feels like it could be used for many issues, to cover a lot of bases.

Then you have a serious problem because a) Reading were docked points in the amended 3 years to 2021 and b) Derby's settlement covered the 3 years to 2017, the 3 years to 2019 and the amended 3 years to 2021- you surely cannot then change that mid-stream.

I'm sorry it sounds unconvincing to me.

It has been amended though and the crucial test will be, what leeway was given to Reading and Derby in the agreed settlements? Was it merely losses of matchday revenue losses excluded, was it matchday revenue and corporate- was it matchday revenue, corporate and other football matters but excluding transfers? Amended in a) The averaging of 2019/20 and 2020/21 and exclusion of losses directly attributable to Covid.

It is also surely weakened by the following transfers during the Pandemic and the immediate aftermath...Watkins and Benrahma from Brentford, Cash from Nottingham Forest, Armstrong from Blackburn, Collins from Stoke- all 5 of these spring to mind but there are others? Brennan Johnson is also linked for big money and we don't even look at relegated clubs who have sold big as they are effectively PL players who have taken a step down.

The problem here is that he is not mentioning the unspoken details of P&S/FFP. I see where he is coming from but he is not mentioning...

1. The risk of a Soft Embargo.
2. The risk of a Hard Embargo.
3. Future Financial Information. This is whereby a club if they fall between lower and higher limits have to submit by April to the EFL, their projections for the following 2 seasons. When you join it all up it's very useful for monitoring purposes.
4. EFL Business Plans- see the Reading case as an example, they were docked 6 immediately and a further 6 might be added if they fall foul of any one of a range of requirements- but that 6 to 12 if it materialises won't mitigate against future charges etc. They also seemed to be working under restrictions last season and this summer it was 6 signings at £8.5k per week- of course they had a helper in Chelsea who sent them Rahman and Drinkwater very cheaply and Chelsea do help them out- but their player salary budget etc needs to fall to £16m next season.
5. Contract extensions- even these can become problematic if a club fall into the FFP quicksand. In 2018, it was reported that Birmingham were unable to renew Morrison and even struggling to renew certain players. In 2020, it was reported that Reading might have issues- we all know about Derby not being able to renew Marriott, because if the proposed extension falls outside of the wage allowance and a club are in that position, they have to go cap in hand to the EFL and it may well be rejected. Stoke even reported not being able to extend/offer a new contract to Nick Powell last April.
6. Budgets to ensure compliance in the present- Reading got 6 players on £8.5k per week per player, no loan fees, transfer fees and no contracts exceeding 12 months- Carroll they may or may not be able to renew, probably have to see what EFL say. Derby signed 4 players on £4.5k per week per player initially- no transfer fee, no loan fee, no permanent contracts exceeding 12 months, no loan contracts exceeding 6 months. In fact at one point the EFL were leaning towards a full embargo- see the Professional Standing Rule and although Derby had 19 players of Professional Standing ordinarily- the limit is 23- they had to field a load of kids vs Chorley a lot of whom got their one and only start, was due to a Covid outbreak a year back and the EFL said "Well you have over 23 players of one appearance or above so what you moaning about".

The thing about not selling players is also a problem...that could be part of a business plan to ensure compliance. Birmingham initially won their Che Adams case but this was overturned on appeal. There was a key part of the ruling which makes me wonder about the wisdom of refusing. Is it the sanction- or the ruling- that sets a precedent?

Ruling or Sanction that sets a precedent?

If anyone wishes to read the full appeal ruling etc. Note that

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

In this instance the follow up was to a points deduction for a breach the prior season- the EFL arguably botched the Business Plan case in 2019.

Ah yes. Regulation 16.20- I've banged on about this before but what exactly does it entail? FFP and other financial issues, or takeovers- it can be a bit of a catch all.

Falling foul of Regulation 16.20 can see a club lose a hell of a lot of autonomy. Basically the EFL can set budgets and such.

Anyway I don't believe that we will fall foul of FFP, we have started the process of hard decisions- taking a points deduction and entering the system, let alone contesting it with independent experts etc feels a bad idea to me.

I just want to pick you up on the embargo section,

I think thats the reason we are bloodong so many academy players this season as I think the club knows that's coming 

[Davefevs]

@Mr Popodopolous

Didn’t want to quote your full post.

So the £30m is (I think) a look back at previous transfer profit and this is a 2-season average.

I don’t think it will fly either, other clubs might turn around and say “that’s City using the amortisation and transfer profit methods to seek an advantage”, e.g. they constantly “trade” because they are in some respects kicking the cost down the road whilst they reap the way transfer profit is calculated on current asset value.

However, there was some talk a while ago about genuine claims for a collapsed transfer market, e.g. club confirms that they had a genuine offer of £x million, but now covid has happened, they are now getting £y million (significantly less).  Maybe that is what Stoke are trying to play with.  I’m not sure how much a case we’d have, when the likes of Diedhiou was approaching his final year and his value about to naturally drop off a cliff?  Possibly some scope, but £30m is clutching at straws imho.

19 minutes ago, Monkeh said:

I just want to pick you up on the embargo section,

I think thats the reason we are bloodong so many academy players this season as I think the club knows that's coming 

To some extent maybe.  I think it’s a more a genuine strategy that developing and using our younger players to keep the costs of the senior members of our squad down.

One other point on the RG comments.  Is he also pointing out to some of our players, more likely their agents, “you can play hardball on signing a new contract, but 1) we haven’t got the money to pay what your client wants and 2) but don’t expect us to let them go cheaply either”

The above applies more to the Kalas, Massengo type players.

[Davefevs]

Looks like RG’s work is getting the attention he wanted!

 

[exAtyeoMax]

7 hours ago, Bristol Rob said:

No.

Nige is more of a House The Fraser man.

Debenhams has gone bust

[Taz]

4 minutes ago, Davefevs said:

Looks like RG’s work is getting the attention he wanted!

 

Pretty sure that would have been the main reason for us publishing the accounts so early, as well as Goulds comments following that.

There are many clubs that will be watching closely, and possibly trying to make the same/similar statements.

Have to admit that I'm not overly concerned. Yet. Covid has hit pretty much every club financially outside of the top 10 or so clubs in the country, and as you and others have pointed out before, I'm also pretty sure there will be other clubs in a worse position than us.

If I was an Ipswich supporter however, I would be watching very closely...

[Mr Popodopolous]

1 hour ago, Monkeh said:

I just want to pick you up on the embargo section,

I think thats the reason we are bloodong so many academy players this season as I think the club knows that's coming 

Yeah I can see that- makes some sense. I fear that may only be the starting point or the early point of the equation- if we were projected to breach to 2022/23 by say £5m- hope it's much less if in fact £0- and agreed a deduction in line with that breach when the final numbers emerged in the summer then that would smooth the process,. That would be a 5 point deduction based on the sliding scale.

The problem then comes with what happens next- a breach leads to the principle of reset but what reset means is basically the prior 2 years reset to £13m- so say we lose £15m in FFP terms this season and £14m next leading to the breach applied next season, then both are reset and it is £26m. We would have targets- perhaps with a suspended deduction as part of the deal or varied metrics or that suspended deduction may be activated. It would mean a loss not exceeding £13m the following season and depending on that season, £13m again. Exceed it and it's a further deduction or charges etc. If however we were able to sell players and get things down to say a £10m loss then the following season we could lose up to £16m in FFP terms.

Then there's aggravating and mitigating factors of course.

Edited January 13, 2022 by Mr Popodopolous

[ExiledAjax]

22 minutes ago, Davefevs said:

However, there was some talk a while ago about genuine claims for a collapsed transfer market, e.g. club confirms that they had a genuine offer of £x million, but now covid has happened, they are now getting £y million (significantly less).  Maybe that is what Stoke are trying to play with.  I’m not sure how much a case we’d have, when the likes of Diedhiou was approaching his final year and his value about to naturally drop off a cliff?  Possibly some scope, but £30m is clutching at straws imho.

A club would surely have to produce documentary evidence to show that they had truly had a deal collapse due to Covid. Signed contracts to transfer a player that had been subsequently cancelled. A mere 'offer' isn't enough surely? Plus I'd expect the EFL to check that a club had not been otherwise compensated for the loss incurred through that. 

Have you actually heard of a transfer deal that was all signed up and ready to go - but was then canceled by the buying club, with no fault of the selling club, purely because of Covid related impacts? I haven't, and I'd think such a case would be reported fairly widely in the press?

It seems a very speculative attempt to get 'assumed' or 'speculated' losses included as a Covid-deductible.

53 minutes ago, Mr Popodopolous said:

That doesn't strike me as an Covid FFP add back, sorry. Just doesn't- how do you prove and quantify for one?

I agree, firstly taking an average of the transfer money received for players A, B, and C in 2019/20 and 2020/21 cannot seriously be used to project what we would receive for players D, E, and F in the summer of 2022. They're different assets, each player is unique and has a unique value. If City sold widgets then perhaps you can say "we made £Xm selling widgets in 2019/20 and £Ym 2020/21  and so it's fair to assume that under normal conditions we would make £Zm selling that same type of widget in 2021/22." But footballers aren't homogenous widgets. Are we seriously trying to say that because we sold Webster and Kelly for what we sold them for, we should be allowed to assume we could have sold/sell Palmer and Dasilva for 4x what we will actually get for them?

It seems very hard to really justify that kind of speculative and subjective deduction.

Perhaps the rub is that the only way you get these kind of deductions agreed by the EFL is if enough clubs agree they can be made. Maybe that is Gould's point - to try and get enough CEOs and Chairmen aligned to put pressure on the EFL (who are of course run by those clubs) to alter the rules and allow this kind of weird speculation. By saying 'if we don't allow this then half the league will get points deductions' you start to turn the screw.

[Mr Popodopolous]

The backing by Stoke is a mixed blessing tbh because they are also under the microscope. If it was someone like Barnsley, or Preston or I dunno Luton- a range of that profile of club then it might gain more traction as they're unlikely to fall foul in any event. OTOH there are similarities of owners- all local owners, of good and medium to long standing in the game, ironically the 3 clubs listed in the Telegraph article.

The Stoke Impairment is interesting indeed- @ExiledAjax I'll post the numbers and claims, you are in the legal profession from memory? Some of their fans also have a strange idea about cash strapped but never mind...Wilmot for a fee, Vrancic on a free and Surridge for a fee- then Ostigard and Sawyers on loan- Ostigard to be replaced by Harwood-Bellis isn't all that cheap. Otoh they actually did manage to offload a lot of those players who were impaired but perhaps very cheaply or for free- and selling Collins for an 8 figure fee might have helped to smooth the process ie some of the Collins fee to accelerate some payoffs or partial payoffs.

Impairment is £42-43m in total but they have accounted for £12-13m of that in the usual way so it's the £30m attributed to Covid that is of interest tbh.

The controversial bit there seems like the Impairment of value. The other bits seem normal enough but that £30m...I can't think of any other Championship side who did it in 2019/20, looked to attribute a loss in player value and thereby write off £30m in amortisation to Covid!

I understand the accounting arguements for Impairment of Intangible Assets but it seems very ropey to me in the context of the FFP regs.

Edited January 13, 2022 by Mr Popodopolous

[ExiledAjax]

4 minutes ago, Mr Popodopolous said:

The backing by Stoke is a mixed blessing tbh because they are also under the microscope. If it was someone like Barnsley, or Preston or I dunno Luton- a range of that profile of club then it might gain more traction as they're unlikely to fall foul in any event. OTOH there are similarities of owners- all local owners, of good and medium to long standing in the game, ironically the 3 clubs listed in the Telegraph article.

The Stoke Impairment is interesting indeed- @ExiledAjax I'll post the numbers and claims, you are legal from memory? Some of their fans also have a strange idea about cash strapped but never mind...Wilmot for a fee, Vrancic on a free and Surridge for a fee- then Ostigard and Sawyers on loan- Ostigard to be replaced by Harwood-Bellis isn't all that cheap. Otoh they actually did manage to offload a lot of those players who were impaired but perhaps very cheaply or for free- and selling Collins for an 8 figure fee might have helped to smooth the process ie some of the Collins fee to accelerate some payoffs or partial payoffs.

Impairment is £42-43m in total but they have accounted for £12-13m of that in the usual way so it's the £30m attributed to Covid that is of interest tbh.

The controversial bit there seems like the Impairment of value. The other bits seem normal enough but that £30m...I can't think of any other Championship side who did it in 2019/20, looked to attribute a loss in player value and thereby write off £30m in amortisation to Covid!

Maybe I misunderstood the Stoke thing. From this extract it looks like they are arguing that the value of the assets (ie players contracts) they currently hold have fallen, and so that impairment should be a Covid deductible. That is different to what I understood Gould to be saying - which was that we had lost out on transfer fees over and above our already accounted for amortisation costs that we would/could have received by selling assets. I do think there's a distinction to be drawn there, and it is easier to quantify a loss in value of amortisation already booked accounted for rather than speculate as to how much you might sell a player for. 

I don't have much of an issue with what Stoke describe in this section you've kindly quoted.

PS. Yes I am legal...my work permit, passport, and all my immigration papers are all in order, thank you for asking. I jest. Yes I am a lawyer rather than an accountant. I have just enough knowledge of accounting to be dangerous.

[Mr Popodopolous]

22 minutes ago, ExiledAjax said:

Maybe I misunderstood the Stoke thing. From this extract it looks like they are arguing that the value of the assets (ie players contracts) they currently hold have fallen, and so that impairment should be a Covid deductible. That is different to what I understood Gould to be saying - which was that we had lost out on transfer fees over and above our already accounted for amortisation costs that we would/could have received by selling assets. I do think there's a distinction to be drawn there, and it is easier to quantify a loss in value of amortisation already booked accounted for rather than speculate as to how much you might sell a player for. 

I don't have much of an issue with what Stoke describe in this section you've kindly quoted.

PS. Yes I am legal...my work permit, passport, and all my immigration papers are all in order, thank you for asking. I jest. Yes I am a lawyer rather than an accountant. I have just enough knowledge of accounting to be dangerous.

Thanks for the bit of context and explanation- yeah I do see differences. What Gould said definitely won't fly.

Certainly a distinction to be drawn but at the same time, I can see grounds for pushback especially as it appears to have been a unique treatment,..unique doesn't mean incorrect of course but I feel the bit of the Derby agreed decision referring to- albeit the issue was a very different one, the principle is similar.

Quote

"a matter of compliance with relevant accounting standards in the context of the EFL's Regulations"

Is there no precedent to draw here? Maybe okay but in the context of the EFL's Regulations should this either number or principle be challenged by the EFL?

Edited January 13, 2022 by Mr Popodopolous

[ExiledAjax]

3 minutes ago, Mr Popodopolous said:

Thanks for the bit of context and explanation- yeah I do see differences. What Gould said definitely won't fly.

Certainly a distinction to be drawn but at the same time, I can see grounds for pushback especially as it appears to have been a unique treatment,..unique doesn't mean incorrect of course but I feel the bit of the Derby agreed decision referring to- albeit the issue was a very different one, the principle is similar.

Is there no precedent to draw here? Maybe okay but in the context of the EFL's Regulations should some of this be added back?

But I think you answer your own question by saying that the issue is a very different one. Yes, in the Derby case (around the stadium sale) the EFL have applied their regulations and derived accounting standards very strictly. To my mind that is fair as in that situation there were no extenuating circumstances that could reasonably allow Derby to take such...unique...decisions when compiling their accounts. They took those decisions in order to shore up their profligacy in other areas. In doing so they gained competitive advantage blah blah blah we all know the rest.

In the case of Stoke (and potentially other clubs) there is the looming spectre of Covid. Stoke and their accountants can, and do, say that the deterioration in value is "...as a result of the Covid 19 pandemic." Now, we know that the EFL is open to amending the P&S rules as a result of the Covid 19 pandemic because they have already done that. So I think Stoke are being clever here and that in fact it's possible that the strict application of the rules in the Derby case, which happened under 'standard' market conditions, could strengthen Stoke's argument to apply flexible and special rules to accounts prepared under the unusual conditions created by Covid 19.

I am happy that it is Stoke who are the test case and not us, but from the limited items I have seen I think they have a reasonable argument. The £30m figure may be too high, but the method used to arrive at it seems fundamentally sound.

Also key is that the 'Stoke method' could potentially be applied evenly and fairly to all clubs. If the EFL accept Stoke's arguments (and sorry, I assume they have done so as this is last year's accounts) then it's fairly easy to say 'ok, every club can deduct 50% of it's amortisations costs for any season affected by Covid (which the EFL decides)'. It's far more complicated to do what Gould suggested and have each club estimate how much transfer profit it has maybe lost. Just look at some of the valuations people pluck from thin air on here for an example of why.

I'll bow to an experienced accountant's better knowledge, but my lay opinion would be that Stoke's arguments look sound, and that the Derby case doesn't have much influence here.

[KegCity]

7 hours ago, The Bard said:

I can't believe they bid that. Not even if it was actually £3 million + £5 million in add ons. 

Why not?

[Davefevs]

1 hour ago, ExiledAjax said:

A club would surely have to produce documentary evidence to show that they had truly had a deal collapse due to Covid. Signed contracts to transfer a player that had been subsequently cancelled. A mere 'offer' isn't enough surely? Plus I'd expect the EFL to check that a club had not been otherwise compensated for the loss incurred through that. 

I was referring to collapse of the transfer market rather than collapse of a deal per se. The point I was maybe making badly was that you couldn’t say in Jan 20 window, Fam was worth £10m but by summer 20 (with one year left) he was now worth £2m and the £8m decrease was down to covid without some proof of interest / a bid of £10m. Nor could you also say all £8m was covid, because some of that was undoubtedly down to his remaining contract length too.

Does that explain it better?

As I said I don’t think it would fly anyway.  Your examples of Kelly and Webster are exactly why!!

1 hour ago, ExiledAjax said:

Maybe I misunderstood the Stoke thing. From this extract it looks like they are arguing that the value of the assets (ie players contracts) they currently hold have fallen, and so that impairment should be a Covid deductible. That is different to what I understood Gould to be saying - which was that we had lost out on transfer fees over and above our already accounted for amortisation costs that we would/could have received by selling assets. I do think there's a distinction to be drawn there, and it is easier to quantify a loss in value of amortisation already booked accounted for rather than speculate as to how much you might sell a player for. 

I don't have much of an issue with what Stoke describe in this section you've kindly quoted.

PS. Yes I am legal...my work permit, passport, and all my immigration papers are all in order, thank you for asking. I jest. Yes I am a lawyer rather than an accountant. I have just enough knowledge of accounting to be dangerous.

The Stoke method of adjusting amortisation down as an impairment is effectively what we’ve done with Nagy (my interpretation of the accounts).

If I’ve read it correctly they’re saying they’ve impaired £12.4m of player contracts and that is part of the £30m overall, eg including commercial and other losses.

That seems a much more sensible approach imho. It still has flaws, but actually committing these to the accounts and then exempting from FFP seems more transparent too.

Maybe Gould and Scholes are playing good cop / bad cop with a pair of different options. Just waiting for Gibson to chip in with his “middling” suggestion.

Gould and Scholes are getting on the front foot, it’s a “high-press” on the EFL.   Far better to start the dialogue with an idea of what you’re trying to achieve than avoid / cover-up / cheat like Mel Morris. 

[chinapig]

I still find Gould's comments to be a bit of special pleading. Had we controlled our costs better and retained enough of the transfer profits to provide some resilience the risk of a points deduction would have been mitigated if not removed entirely. Instead we blew it on a bloated squad and wage bill.

Also the obverse of the hypothetical loss of transfer income is the kind of reduction in player wages we have seen with Weimann and Baker, which is not hypothetical and which is likely to continue imo.

Gambling on continuing to receive big fees was not the way to achieve the sustainability Steve claims to want.

[The Bard]

55 minutes ago, KegCity said:

Why not?

 He's actually quite exposed to use horse racing terminology.

 

Clearly top division potential longterm but not in the same league financially as Lloyd Kelly for example.

[Mr Popodopolous]

1 hour ago, ExiledAjax said:

But I think you answer your own question by saying that the issue is a very different one. Yes, in the Derby case (around the stadium sale) the EFL have applied their regulations and derived accounting standards very strictly. To my mind that is fair as in that situation there were no extenuating circumstances that could reasonably allow Derby to take such...unique...decisions when compiling their accounts. They took those decisions in order to shore up their profligacy in other areas. In doing so they gained competitive advantage blah blah blah we all know the rest.

In the case of Stoke (and potentially other clubs) there is the looming spectre of Covid. Stoke and their accountants can, and do, say that the deterioration in value is "...as a result of the Covid 19 pandemic." Now, we know that the EFL is open to amending the P&S rules as a result of the Covid 19 pandemic because they have already done that. So I think Stoke are being clever here and that in fact it's possible that the strict application of the rules in the Derby case, which happened under 'standard' market conditions, could strengthen Stoke's argument to apply flexible and special rules to accounts prepared under the unusual conditions created by Covid 19.

I am happy that it is Stoke who are the test case and not us, but from the limited items I have seen I think they have a reasonable argument. The £30m figure may be too high, but the method used to arrive at it seems fundamentally sound.

Also key is that the 'Stoke method' could potentially be applied evenly and fairly to all clubs. If the EFL accept Stoke's arguments (and sorry, I assume they have done so as this is last year's accounts) then it's fairly easy to say 'ok, every club can deduct 50% of it's amortisations costs for any season affected by Covid (which the EFL decides)'. It's far more complicated to do what Gould suggested and have each club estimate how much transfer profit it has maybe lost. Just look at some of the valuations people pluck from thin air on here for an example of why.

I'll bow to an experienced accountant's better knowledge, but my lay opinion would be that Stoke's arguments look sound, and that the Derby case doesn't have much influence here.

I agree with a lot of this post and yes the EFL have applied their regulations in conjunction with accounting standards very strictly,

Possibly so in general and yes they are very much the test case- although you mention last season, accounts were actually released last season but covering the period up to end of May 2020- we'd need to see their 2021 accounts to get a balanced picture. They appear not to be in 

Hadn't thought of that for the Stoke method- I did wonder if this was a possibility, lots of clubs will therefore knock off a chunk- but these clubs have not, we have not, Millwall have not, afaik Blackburn have not although there is confusion between Venkys London and Blackburn as to which the reporting entity for FFP is- I assume Wycombe have not and Norwich and this appears to be Birmingham's via HK, Birmingham have not. Stoke could yet set a precedent but no other club did anything like this in 2019/20 accounts of all the clubs at our level who released accounts. One have not released accounts for 3 years and we can guess who they are?

Readding back a bit of the Impairment to the FFP losses could well tip them into default- as to EFL acceptance, it's genuinely hard to say because Derby and their stadium sale and latterly as it turned out amortisation, were subject to ongoing review- and with something like this seeing how markets recover or don't, an ongoing review would seem sensible with this tbh.

Like I said before, unique doesn't necessarily mean incorrect but a unique treatment at that stage it is. They cut their annual amortisation bill by about £20-25m I estimate year on year- was £30m in 2019/20, I reckon £5-10m in 2020/21 as a result of this method. Talking about Stoke here.

[ExiledAjax]

3 minutes ago, Davefevs said:

I was referring to collapse of the transfer market rather than collapse of a deal per se. The point I was maybe making badly was that you couldn’t say in Jan 20 window, Fam was worth £10m but by summer 20 (with one year left) he was now worth £2m and the £8m decrease was down to covid without some proof of interest / a bid of £10m. Nor could you also say all £8m was covid, because some of that was undoubtedly down to his remaining contract length too.

Sure.

Does that explain it better?

As I said I don’t think it would fly anyway.  Your examples of Kelly and Webster are exactly why!!

The Stoke method of adjusting amortisation down as an impairment is effectively what we’ve done with Nagy (my interpretation of the accounts).

If I’ve read it correctly they’re saying they’ve impaired £12.4m of player contracts and that is part of the £30m overall, eg including commercial and other losses. 

That seems a much more sensible approach imho. It still has flaws, but actually committing these to the accounts and then exempting from FFP seems more transparent too.

Maybe Gould and Scholes are playing good cop / bad cop with a pair of different options. Just waiting for Gibson to chip in with his “middling” suggestion.

Gould and Scholes are getting on the front foot, it’s a “high-press” on the EFL.   Far better to start the dialogue with an idea of what you’re trying to achieve than avoid / cover-up / cheat like Mel Morris. 

I think crucially what Stoke have done is adjust the existing and persisting amortisation bill down, on the basis that the amounts are no longer fair rep of market value. For us it would mean saying that Kalas may be a £2m per season amortisation cost, but that we should be allowed to reduce that by 75% to £500k. So even though we retain Kalas' as an asset, we save a huge amount by arguing that his value has drastically fallen due to the collapsed market, but we argue to add that back on for P&S purposes as a covid affect. 

Stoke say that their total impairment was £42-43m in total. Comprising an initial £12.4m "prior to Covid 19 considerations." and then a further £30.1m "directly" attributable to Covid. As I say, they seem to have taken their existing amortisation bill, and argue that 75-80% should be written off as a Covid-deductible. Note that Stoke's amortisation costs in the accounts to May 2020 were £30.3m, then they declare the impairment as well, and argue that 30.1m of it is allowable for P&S as a covid deductible. 

I think this is it. I might be getting tied in knots with amortisation and impairment.

Might get a coffee, listen to Nige's press conference, and come back to this in a bit.

3 minutes ago, Mr Popodopolous said:

Like I said before, unique doesn't necessarily mean incorrect but a unique treatment at that stage it is. They cut their annual amortisation bill by about £20-25m I estimate year on year- was £30m in 2019/20, I reckon £5-10m in 2020/21 as a result of this method. Talking about Stoke here.

I agree, and I also suspect that a unique treatment means that it's for that club to justify their unique take on things rather than the other 23 to agree to and adopt their methods unquestioningly. We use PKF Francis Clark to audit, Stoke used RSM. There will be different techniques around.

[GrahamC]

1 hour ago, KegCity said:

Why not?

Because a club that is about to announce £38m losses cannot afford to reject offers of £8m to help offset this.

Whatever our view of HNM & his actual value the only fee we banked in the summer was the nominal one (£50k?) for George Nurse from Shrewsbury, which in the scale of our losses is about as valuable as to us as 50p.

There is already a storm over Derby turning down bids for players, if we do not drastically reduce our expenditure & cannot come up with a plan to stay within FFP then we’ll get a points deduction & things like this (if they are true) will not help our case at all.

 

[KegCity]

43 minutes ago, The Bard said:

 He's actually quite exposed to use horse racing terminology.

 

Clearly top division potential longterm but not in the same league financially as Lloyd Kelly for example.

Hence why he’s not going for Lloyd Kelly fee.

24 minutes ago, GrahamC said:

Because a club that is about to announce £38m losses cannot afford to reject offers of £8m to help offset this.

Whatever our view of HNM & his actual value the only fee we banked in the summer was the nominal one (£50k?) for George Nurse from Shrewsbury, which in the scale of our losses is about as valuable as to us as 50p.

There is already a storm over Derby turning down bids for players, if we do not drastically reduce our expenditure & cannot come up with a plan to stay within FFP then we’ll get a points deduction & things like this (if they are true) will not help our case at all.

 

The decisions we’ve made as a club over the last few years makes it pretty believable to me.

[Mr Popodopolous]

17 minutes ago, GrahamC said:

Because a club that is about to announce £38m losses cannot afford to reject offers of £8m to help offset this.

Whatever our view of HNM & his actual value the only fee we banked in the summer was the nominal one (£50k?) for George Nurse from Shrewsbury, which in the scale of our losses is about as valuable as to us as 50p.

There is already a storm over Derby turning down bids for players, if we do not drastically reduce our expenditure & cannot come up with a plan to stay within FFP then we’ll get a points deduction & things like this (if they are true) will not help our case at all.

 

Agreed. Here is how I think it might play out FWIW.

We submit our Projections in March as usual, and our actual for last season. We will be fine until 2021 and 2022.

The problem may well arise when it comes to the Future Financial Information for the period ending in 2023 and 2024..

Once it rolls into the period that ends next season ie:

Combined Average- 2019/20 and 2020/21- Actual

Accounts- 2021/22- Projection in March, pretty much updated in June/July time. Close to real.

The challenge for us then will be to fill the FFP hole that is set to arise in 2022/23 or face a deduction perhaps in Spring 2023. Deduction linked to size of breach, mitigating and aggravating factors etc.

[Davefevs]

1 hour ago, ExiledAjax said:

I think crucially what Stoke have done is adjust the existing and persisting amortisation bill down, on the basis that the amounts are no longer fair rep of market value. For us it would mean saying that Kalas may be a £2m per season amortisation cost, but that we should be allowed to reduce that by 75% to £500k. So even though we retain Kalas' as an asset, we save a huge amount by arguing that his value has drastically fallen due to the collapsed market, but we argue to add that back on for P&S purposes as a covid affect. 

Stoke say that their total impairment was £42-43m in total. Comprising an initial £12.4m "prior to Covid 19 considerations." and then a further £30.1m "directly" attributable to Covid. As I say, they seem to have taken their existing amortisation bill, and argue that 75-80% should be written off as a Covid-deductible. Note that Stoke's amortisation costs in the accounts to May 2020 were £30.3m, then they declare the impairment as well, and argue that 30.1m of it is allowable for P&S as a covid deductible. 

I think this is it. I might be getting tied in knots with amortisation and impairment.

Might get a coffee, listen to Nige's press conference, and come back to this in a bit.

I agree, and I also suspect that a unique treatment means that it's for that club to justify their unique take on things rather than the other 23 to agree to and adopt their methods unquestioningly. We use PKF Francis Clark to audit, Stoke used RSM. There will be different techniques around.

Okay, I’ve read the Stoke stuff again!

Individual players, no longer part of the first team (Afobe?) impaired by £12m.  Rest of the squad left impaired at 70-85%, is £18m….therefore £30m player impairment total due to covid.  Have I got that right?

I see the logic in this, if not the numbers themselves.

Playing Devil’s advocate…has the transfer market “collapsed” or just for transfer NOT to Premier League?  If you’ve got a player good enough to go to the PL might you still get a very high fee (in relation to the rest of the market)?  Think there are some debates to be had here.

If RG’s £30m of lost fees is indeed resolved by adjusting the amortisation down for each player, then it’s pretty similar to Stoke’s method.  I do think it has to be a proper accounting process / method, even if you then put something different in the P&S return.

If we “impaired” amortisation (wrong terminology no doubt, I’m not an accountant!) by 75%, wed cut this season’s amortisation from £6.7m to £1.7m and next season’s £6.6m to £1.65m, a saving of circa £10m.

Add in revues lost from football and commercial then you have a club with no P&S issues at all.

But what do you do if the market picks up?  Do you have to re-state values?  Just trying to think of any flaws?

[ExiledAjax]

41 minutes ago, Davefevs said:

Playing Devil’s advocate…has the transfer market “collapsed” or just for transfer NOT to Premier League?  If you’ve got a player good enough to go to the PL might you still get a very high fee (in relation to the rest of the market)?  Think there are some debates to be had here.

I think the argument there is that there's a big unknown element so we take a best guess. So long as it's fairly applied to all clubs it doesn't really matter right?

42 minutes ago, Davefevs said:

But what do you do if the market picks up?  Do you have to re-state values?  Just trying to think of any flaws?

On the face of it I'd say no you don't have to re-state. Accounts should consider value for the period that they cover, so if the market picks up this month then you can have your May 21 accounts use one value and May 22 accounts use another...and that would be ok. I think?

[SydneyCity]

I’m certainly not qualified to talk at a finance level so this is likely over simplistic (and quite possibly stupid)… but is this a realistic explanation / example:

1. Watford bid $8m for Massengo

2. We turn it down as it’s not enough

3. Massengo plays more, still young, gets better and his theoretical value increases

4. Covid massively impacts club.

5. Club announces early that we’re “in trouble”

6. Offers come flooding in for Massengo but because “we’re skint” they’re in the $2m region.

7. Club “proves” that we’ve lost at least $6m (technically more as we felt $8m was undervalued)

8. Repeat process for all saleable player assets (or use Massengo loss percentage as baseline decrease for all player values)

[Monkeh]

4 hours ago, chinapig said:

I still find Gould's comments to be a bit of special pleading. Had we controlled our costs better and retained enough of the transfer profits to provide some resilience the risk of a points deduction would have been mitigated if not removed entirely. Instead we blew it on a bloated squad and wage bill.

Also the obverse of the hypothetical loss of transfer income is the kind of reduction in player wages we have seen with Weimann and Baker, which is not hypothetical and which is likely to continue imo.

Gambling on continuing to receive big fees was not the way to achieve the sustainability Steve claims to want.

We wouldn't of had an issue if the commercial and transfer market both collapsed at the same time

[JoeAman08]

59 minutes ago, SydneyCity said:

I’m certainly not qualified to talk at a finance level so this is likely over simplistic (and quite possibly stupid)… but is this a realistic explanation / example:

1. Watford bid $8m for Massengo

2. We turn it down as it’s not enough

3. Massengo plays more, still young, gets better and his theoretical value increases

4. Covid massively impacts club.

5. Club announces early that we’re “in trouble”

6. Offers come flooding in for Massengo but because “we’re skint” they’re in the $2m region.

7. Club “proves” that we’ve lost at least $6m (technically more as we felt $8m was undervalued)

8. Repeat process for all saleable player assets (or use Massengo loss percentage as baseline decrease for all player values)

I don’t think it is that. Think we just didn’t want to sell. All this FFP stuff is relevant but at the end of the day, you need to do right by the team. You can say with hindsight, maybe we’d have been better off accepting(don’t know the details of the bid) as hasn’t always been first choice as lost some form. That said seems to be picking up and has probably been heavily involved in matches we won equating to more points than we’d be deducted for failing FFP. 

[BRIAN WILSON]

2 hours ago, Davefevs said:

Okay, I’ve read the Stoke stuff again!

Individual players, no longer part of the first team (Afobe?) impaired by £12m.  Rest of the squad left impaired at 70-85%, is £18m….therefore £30m player impairment total due to covid.  Have I got that right?

I see the logic in this, if not the numbers themselves.

Playing Devil’s advocate…has the transfer market “collapsed” or just for transfer NOT to Premier League?  If you’ve got a player good enough to go to the PL might you still get a very high fee (in relation to the rest of the market)?  Think there are some debates to be had here.

If RG’s £30m of lost fees is indeed resolved by adjusting the amortisation down for each player, then it’s pretty similar to Stoke’s method.  I do think it has to be a proper accounting process / method, even if you then put something different in the P&S return.

If we “impaired” amortisation (wrong terminology no doubt, I’m not an accountant!) by 75%, wed cut this season’s amortisation from £6.7m to £1.7m and next season’s £6.6m to £1.65m, a saving of circa £10m.

Add in revues lost from football and commercial then you have a club with no P&S issues at all.

But what do you do if the market picks up?  Do you have to re-state values?  Just trying to think of any flaws?

What I don't get is the fact that Stokes Accounts are to May 2020 YES MAY 2020 just a couple of months into the inpact of Covid , and a VERY high value of amortisation BUT WHY ? at May 2020 , that is not a true and fair assesment at that point in time.

Future period to May 2021 yes the CV-19 impact would certainly be severe , but surely it is against Accounting Standards to make provision for FUTURE Losses in a previous year submitted P&L  ?

[Davefevs]

3 minutes ago, BRIAN WILSON said:

What I don't get is the fact that Stokes Accounts are to May 2020 YES MAY 2020 just a couple of months into the inpact of Covid , and a VERY high value of amortisation BUT WHY ? at May 2020 , that is not a true and fair assesment at that point in time.

Future period to May 2021 yes the CV-19 impact would certainly be severe , but surely it is against Accounting Standards to make provision for FUTURE Losses in a previous year submitted P&L  ?

I’m not an accountant but I seem to recall @Hxjstating that although the accounts are numbers at a given date you can factor in things that have happened between the end of the financial year and the accounts being written…and reflect that.

So, guesswork, Stoke have made their adjustments in that set of accounts, and won’t be trying to repeat again in this set of accounts….not the player bit anyway.

Happy to be corrected.

[Mr Popodopolous]

Was going to post this earlier but the computer wasn't really working right and had to nip out.

Basically this is a piece by a well known Birmingham author- who writes about Birmingham and sometimes FFP generally. Good stuff although related about a former failed CEO who left last season and certainly lefty his mark- does that sound familar  there are detailed points about Birmingham, FFP and their saga- where he got his info from I dunno! Doesn't sound desirable.

The points deduction with associated business plan may not be ideal!

https://almajir.net/2022/01/13/wheres-the-money-gone-dong/

Some salient points relating to FFP- although remember Birmingham were more reckless, losses rising without trying to turn the tide and dismissive of the need to control revenue- all things that we are not- e.g. they got 7 for the overspend itself, 3 for not trying/letting it shoot up and 1 back for cooperating and seemingly helping in the end.

Birmingham did not take heed of the warnings. Clearly.

I'll post these tomorrow, my print screen is playing up.

[SydneyCity]

4 hours ago, JoeAman08 said:

I don’t think it is that. Think we just didn’t want to sell. All this FFP stuff is relevant but at the end of the day, you need to do right by the team. You can say with hindsight, maybe we’d have been better off accepting(don’t know the details of the bid) as hasn’t always been first choice as lost some form. That said seems to be picking up and has probably been heavily involved in matches we won equating to more points than we’d be deducted for failing FFP. 

Re-read my post and realised it isn't clear. I was using it as an example of how RG got to the "We're losing at least $30m on transfers alone" statement ie:

It's reported Watford did bid $8m for Massengo pre-Covid impact but we turned it down. Announcing we're skint encouraged a series of undervalue bids for Massengo, we then used the difference between pre and post covid bids to extrapolate that we've lost at least $30m in transfers.

[JoeAman08]

5 hours ago, SydneyCity said:

Re-read my post and realised it isn't clear. I was using it as an example of how RG got to the "We're losing at least $30m on transfers alone" statement ie:

It's reported Watford did bid $8m for Massengo pre-Covid impact but we turned it down. Announcing we're skint encouraged a series of undervalue bids for Massengo, we then used the difference between pre and post covid bids to extrapolate that we've lost at least $30m in transfers.

I think it is possible they might do something like that after the fact. Just talking about Massengo as a one off I don’t think that would be the reason they rejected it. 

[Davefevs]

9 hours ago, Mr Popodopolous said:

Was going to post this earlier but the computer wasn't really working right and had to nip out.

Basically this is a piece by a well known Birmingham author- who writes about Birmingham and sometimes FFP generally. Good stuff although related about a former failed CEO who left last season and certainly lefty his mark- does that sound familar  there are detailed points about Birmingham, FFP and their saga- where he got his info from I dunno! Doesn't sound desirable.

The points deduction with associated business plan may not be ideal!

https://almajir.net/2022/01/13/wheres-the-money-gone-dong/

Some salient points relating to FFP- although remember Birmingham were more reckless, losses rising without trying to turn the tide and dismissive of the need to control revenue- all things that we are not- e.g. they got 7 for the overspend itself, 3 for not trying/letting it shoot up and 1 back for cooperating and seemingly helping in the end.

Birmingham did not take heed of the warnings. Clearly.

I'll post these tomorrow, my print screen is playing up.

Thanks for this.  Really interesting seeing the dialogue with EFL and how they ignored it.

[The Bard]

5 minutes ago, JoeAman08 said:

I think it is possible they might do something like that after the fact. Just talking about Massengo as a one off I don’t think that would be the reason they rejected it. 

Seems like we're debating a hypothetical rejection of a hypothetical offer?

 

Or did this really happen?

[BTRFTG]

Any club seeking to blame Covid for 'losses' (sic) in asset value should automatically be deducted additional points for having the gall so to do.

By all means adjust and report losses incurred by changes in accounting practice but that's something the club chooses to do and has sweet FA to do with Covid.

Some folks appear to forget the purpose and basis of accounting. It provides a useful tool to one wishing to assess or gauge value AND RISK but is not nor ever has been a guarantee of aforementioned value.

In signing a player all one is guaranteed is liability against contract value. All else is subjective speculation,  in reality players are all worthless. One may place a value on them but only market & time will prove whether that was in the right quantum. A player gets crocked or dies they're worthless, hence why clubs insure them (Sala and Cardiff a prime example of poor risk management in respect of their valuation of him.)

Transfer values in the UK are primarily dictated by Premier monies and whilst there was some impact from Covid it was marginal compared to their main income source, which wasn't impacted at all and which, perversely, may increase future income. If you want to see the future look at the NFL. Although much of last & this season saw reduced capacity stadiums the Commissioner wasn't shy in publishing their key money making stat - of the top 100 US TV audiences in 2021 91 were live NFL games, top 16 all NFL, 48 of the top 50 NFL.  TV, Advertisers Sponsors want those numbers, fans in stadia are atmosphere chicken-feed.

It's easy to blame Covid for folks finally cottoning-on that football had financially become unsustainable. If Covid wasn't the final straw, something else would have been. Downward adjustment had to happen.

 

 

[Mr Popodopolous]

9 hours ago, Davefevs said:

Thanks for this.  Really interesting seeing the dialogue with EFL and how they ignored it.

Reading it again earlier, some of the detail is astonishing- like I say hats off to Al Majir for getting hold of it or if not the documents themselves, the summaries- and wanting to spend another £27m when FFP had already been breached is just one mad detail- we're extremely far from that and that would mitigate, as would our losses not accelerating unchecked- think and remember pre Covid, it went up from a couple of million in 2015/16 to something like £37m in Year 3 via £15-20m in 2016/17!! Obviously this is prior to allowable deductions for FFP.

Otoh, I don't think us outright refusing to sell players would go down well either if it came to that- but our stance is a lot more promising than that of Birmingham, Hopefully some of my summaries will work today,

Edited January 14, 2022 by Mr Popodopolous

[Mr Popodopolous]

Quote

REBEL CLUBS IN EFL LEGAL FIGHT 

The EFL are facing the threat of a legal challenge from Championship clubs over their refusal to significantly alter profit and sustainability rules to account for the financial impact of the pandemic.

Around six clubs are understood to have had initial talks about joint legal action to challenge the EFL’s threshold for permitted losses, which is set at £3 9million over a three-year period. The EFL plan to give clubs an additional allowance of around £5m to cover for the absence of gate receipts when crowds were prohibited last season.

The rebel clubs want extra wriggle room due to the Covid-induced collapse of the transfer market, which has left many of them unable to balance their books by selling players. 

Derby and Reading have been deducted points for breaching the losses threshold in recent years. Middlesbrough, Stoke and Bristol City are at risk of a breach over the next three-year cycle judging by their most recent published accounts.

Via @MattHughesDM

Gulp!

Now, £5m- well if that is what Derby and Reading have been handed but we would have to significantly revise calculations then!

£48.4m loss (give or take)

Minus £10m in FFP allowances- give or take.

£38.4m- halved.

If they only make a £5m extra allowance. for clubs..well things get very testing. The key question is what did they allow for Derby and Reading, both in terms of a) Absolute numbers and b) Categories.

£16-17m loss the averaged out 2020 and 2021 loss? I still don't think we fail to THIS season or to 2021- but to 2022/23 is a problem absolutely.

FWIW there have been joint legal action attempts in the past but the rules have been upheld- if we or other clubs don't like it then we know the answer no? That's not to say I necessarily agree with a potential decision not to include commercial revenue in the allowed revenue losses but we have been a big supporter of these regulations as a club...so.

I don't know exactly whether you subtract the £5m from the halved average or you subtract initially then divide.

Edited January 15, 2022 by Mr Popodopolous

[Mr Popodopolous]

Hopefully now this stuff will post.

As we can see- annotations those of Al Majir or those he got the info from- I don't know if this was Birmingham or the EFL who put the ideas forward but it shows a) The problems and b) The potential solutions. It's not pretty- I've also read in the past that they tried naming rights and yes these were allowed but their view of the fair value vs the actual value...these vastly differed and it was the latter that won the day!

This was to stave off a breach in the season just gone and beyond- our position I believe would be to stave off a breach in the upcoming season and probably beyond

Even Harvey took exception- Birmingham at that time, really went above and beyond it seems! £27m on 8 new players despite a) The overspend b) Pedersen issue c) The upcoming seasons figures!?

It did result in future misconduct charges, in addition to the -9. Though Birmingham won their case, the EFL won their appeal. No sanction but principle upheld and principle upheld probably could lead to a sanction for clubs in the future.

I happen to believe the EFL might have botched this 2nd bit- a view I've held for a while but again it isn't pretty for clubs in that boat moving forward. Wasn't great for Birmingham either!

He has possibly conflated this a little here- as it turned out they hit the target they seemed to get quite lucky to avoid this 2nd one on one level by improved conduct in general terms, selling Adams at the start of July 2019 and the stadium for what actually seemed fair value at the end of 2018/19- a loophole that is no longer open to clubs. Birmingham should be fine to this and next season but wonder if might come around in 2023/24 again under the current regs,

I also believe that the EFL learnt from this to an extent with Reading- 6 points off now and a budget, if that or a range of other conditions not adhered to, a further 6 this or next season- to be applied instantly on breach.

Had they sold Adams in Jan 2019, they might have fallen within.

On the one hand, our conduct in the runup is better by far and we have a strong track record- but otoh if we refuse to sell players and take the points deduction it's not a great path due to all that can come with it!

We breach and we actively choose not to sell to avoid Breach Number 2? Could be the points tariff plus perhaps an extra 3 for breach of agreed budget or aggravating factor the 2nd time around- 2nd offence that sort of thing.

Edited January 15, 2022 by Mr Popodopolous

[Son of Fred]

On 13/01/2022 at 17:39, chinapig said:

I still find Gould's comments to be a bit of special pleading. Had we controlled our costs better and retained enough of the transfer profits to provide some resilience the risk of a points deduction would have been mitigated if not removed entirely. Instead we blew it on a bloated squad and wage bill.

Also the obverse of the hypothetical loss of transfer income is the kind of reduction in player wages we have seen with Weimann and Baker, which is not hypothetical and which is likely to continue imo.

Gambling on continuing to receive big fees was not the way to achieve the sustainability Steve claims to want.

Great post - concise & understandable for 'non finance people such as myself .

Another example of poor decision making - gambling even from the headshed..

Hard to quantify from a fortune made in the financial sector...

[Son of Fred]

On 12/01/2022 at 09:03, Fordy62 said:

I think anyone buying Scott for 7m is getting a complete steal. 

I think if he continues on the same trajectory in the next 12/18 months, he could become our record sale and it’ll be to one of the big boys. 

Indeed.....sell HNM (should we give Watford a call?)..

Sell Bentley (happy enough with Max "between the sticks")

Keep our Babber Scott as the "get out of jail" card (if you'll pardon the expression)....

Edited January 15, 2022 by Son of Fred

[The Swan and Cemetery]

Don’t claim to understand FFP, but is there an argument that a 3 year timeframe doesn’t allow for a long enough cycle of up and downs? Therefore the only way to be confident of complying, is to work towards the most conservative plausible scenario you can come up with? That might be sensible for sustainability for football in the FL, but would surely result in an even more ludicrous cliff event between PL and FL? That then leads to something more akin to rugby, which then leads to questions about ring fencing. Arguably already at ‘soft’ ring fencing given parachute payments. Feels to me that whilst lots of good intent in FFP, Football League need to think a bit harder about unintended consequences and how they influence the wider game, whilst also pulling their clubs back from the unsustainable position they’ve been in.
 

A difficult conundrum, but the sum of the powers that be, FA, PL, FL, government etc, need to recognise the extent of support for lower league clubs, which is very different to other countries. Global TV money may dampen this importance from a commercial perspective, but can’t ignore Sunderland getting >30k in tier 3, teams getting >5k in tier 5 etc. Should be a way to monetise that support into a sensible business model, whilst protecting the importance to supporters of their local club. 

[Son of Fred]

18 minutes ago, The Swan and Cemetery said:

Don’t claim to understand FFP, but is there an argument that a 3 year timeframe doesn’t allow for a long enough cycle of up and downs? Therefore the only way to be confident of complying, is to work towards the most conservative plausible scenario you can come up with? That might be sensible for sustainability for football in the FL, but would surely result in an even more ludicrous cliff event between PL and FL? That then leads to something more akin to rugby, which then leads to questions about ring fencing. Arguably already at ‘soft’ ring fencing given parachute payments. Feels to me that whilst lots of good intent in FFP, Football League need to think a bit harder about unintended consequences and how they influence the wider game, whilst also pulling their clubs back from the unsustainable position they’ve been in.
 

Great post....

The road to hell is indeed paved with good intentions..

[Bristol Rob]

Only because it doesn't warrant a new thread, and naming right was mentioned a few posts back, but...

There is some prime in stadium space available for a sponsor.

The top of the Dolman, roof bit that slopes towards the pitch.

 

[Lanterne Rouge]

4 hours ago, Bristol Rob said:

Only because it doesn't warrant a new thread, and naming right was mentioned a few posts back, but...

There is some prime in stadium space available for a sponsor.

The top of the Dolman, roof bit that slopes towards the pitch.

 

The back of the Lansdown is similar. It`s just a huge white space and every car coming down Rownham Hill would see it.

[ExiledAjax]

Brentford have published their accounts up to 30 June 2021, so for their final season in the Champ before they gained access to the riches of the PL's TV money. Highlights below with my emphasis in bold. They are an interesting comparison given turnover is pretty similar to us, £15.3m for them, £16.6m for us, and are supposedly the example of how to be successful whilst also being a 'trading' club (although their system has notable differences to the way we do things).

https://www.brentfordfc.com/news/2022/january/brentford-fc-2021-annual-accounts/

Brentford FC has today published the annual results for the year ended 30 June 2021. These accounts show turnover increasing to a record high of £15.3m (2020: £13.9m). This has been driven by increases across EFL and FA revenues, other football revenues (including monies from live TV coverage) and commercial income. It is also despite a sharp reduction in ticketing income due to matches being played behind closed doors or in front of a significantly reduced capacity as a result of the pandemic.

The estimated negative financial impact of COVID-19 on the 2020/21 season is approximately £2.8m (2020: £1.0m). This figure is a net figure and primarily comprises lost matchday revenue, offset by a reduction in matchday operating costs and grant income.

The financial statements for the year under review show a group operating loss, before player trading, of £53.1m (2020: loss of £34.1m). The current year's loss arises following a season where virtually no matchday income was generated due to COVID-19 restrictions preventing supporter attendance at the vast majority of games. The current year's loss also includes one-off bonuses paid out to players and staff following our successful promotion to the Premier League in May 2021.

Our player trading drove a significant profit on the disposal of player registrations of £44.3m (2020: profit of £24.9m).  The principal contributors to this were the sale of Ollie Watkins [reportedly £34m] to Aston Villa and the sale of Saïd Benrahma [reportedly £23m plus initial loan fee of £4m] to West Ham United. These two transfers continue to provide evidence of the strong work done by the Club to recruit and develop talent.

The knock-on impact of this was that the loss before taxation was £8.5m (2020: loss of £9.1m) - a significant reduction on the operating loss. This loss before taxation would have been a profit of approximately £3.5m were it not for promotion-related payments totalling £12.0m.

Matthew Benham's total investment in the group on 30 June 2021, comprised of equity and loans, stood at £104.1m (2020: £103.0m). This sum includes £22.4m (2020: £21.3m) of secured loans specifically in relation to the Brentford Community Stadium project.

So, bonuses for promotion were about £12m. which means that had they not been promoted, and had not sold Watkins and Benrhama (plus others) their loss would have been about £41m - £3m more than ours! Basically they have balanced the books by selling players. Exactly what we do...except in the last couple of seasons we've not been able to achieve a couple of big sales.

They've reportedly only spent about 35m net on transfers this season (so far), so as they'll be earning an extra 100m this season just on TV revenue, plus the extra revenue for the return of fans and their new stadium, if they do come back down (unlikely this season) they are going to have the most monumentally large warchest and be so far away from failing P&S as to be able to offer mad wages fro the Champ. 

Edit: The usual excellent breakdown from Maguire on Twitter 

 

Edited January 17, 2022 by ExiledAjax

[Mr Popodopolous]

Article by Football365

https://www.football365.com/news/opinion-bristol-city-losses-pandemic-championship-opinion

Says we won't be the worst hit but also queries validity of our arguments in terms of trying to change FFP. Not read it in depth.

What I will say is that thusfar we are the worst affected and have made the biggest losses. 17 clubs at least still to release however!

Middlesbrough, Nottingham Forest and Stoke could be interesting. Cardiff too?

Edited January 20, 2022 by Mr Popodopolous

[Waconda]

3 minutes ago, Mr Popodopolous said:

Article by Football365

https://www.football365.com/news/opinion-bristol-city-losses-pandemic-championship-opinion

Says we won't be the worst hit but also queries validity of our arguments in terms of trying to change FFP. Not read it in depth.

What I will say is that thusfar we are the worst affected to date. 17 clubs at least still to release however!

 At Bristol City, the wages to turnover ratio for 2019/20 was 123%, actually below the midway point in that particular table. At the top were Reading, on 211%. We’d expect these figures to deteriorate as the accounts covering last season continue to be released.

We will ne nowhere near the worse, just went first. Will be 6-8 teams in a darker place I would predict. 

There will have to be some kind of COVID "right off" year.

 

 

[Mr Popodopolous]

Just now, VT05763 said:

 At Bristol City, the wages to turnover ratio for 2019/20 was 123%, actually below the midway point in that particular table. At the top were Reading, on 211%. We’d expect these figures to deteriorate as the accounts covering last season continue to be released.

We will ne nowhere near the worse, just went first. Will be 6-8 teams in a darker place I would predict. 

There will have to be some kind of COVID "right off" year.

 

 

Worth remembering of course that if there are big player sales or Parachute Payments that cushions things significantly even if only as a one off.

Not in terms of wages/turnover which in itself is a distortion last year for all as turnover was hit but in terms of the losses.

As for Covid:

1) 2019/20 and 2020/21 added and halved. Which helps.

2) The key devil in the detail is, what constitutes losses directly attributable to Covid 19? SwissRamble says our losses over 2 years were £16m IIRC.

IF that was the case and given our usual allowable costs of £5m per season, then I'd make our FFP loss in that combined period £11m or thereabouts. Which is less scary.

[BTRFTG]

1 hour ago, VT05763 said:

 At Bristol City, the wages to turnover ratio for 2019/20 was 123%, actually below the midway point in that particular table. At the top were Reading, on 211%. We’d expect these figures to deteriorate as the accounts covering last season continue to be released.

We will ne nowhere near the worse, just went first. Will be 6-8 teams in a darker place I would predict. 

There will have to be some kind of COVID "right off" year.

 

 

And in 20/21 (including £1.6m of Government Grant income some of which I suspect will be repaid,) wages were 195% of Turnover.

Exclude the Government Grant and wages to Turnover were 212%.

[Bristol Rob]

Remember when there was (on here) a month long argument around the club using the furlough scheme?

Things could be worse.

[Coin-op]

Anybody know if we will receive any money if Webster gets called up to the England squad? 

[BTRFTG]

4 hours ago, Mr Popodopolous said:

Worth remembering of course that if there are big player sales or Parachute Payments that cushions things significantly even if only as a one off.

Not in terms of wages/turnover which in itself is a distortion last year for all as turnover was hit but in terms of the losses.

As for Covid:

1) 2019/20 and 2020/21 added and halved. Which helps.

2) The key devil in the detail is, what constitutes losses directly attributable to Covid 19? SwissRamble says our losses over 2 years were £16m IIRC.

IF that was the case and given our usual allowable costs of £5m per season, then I'd make our FFP loss in that combined period £11m or thereabouts. Which is less scary.

Our direct losses due to Covid in 20/21 were in the region £8-9m. Income was down £11m but operating costs also came down £5m.

Don't think one could bank transfer losses due to Covid, unless we've written off others debt, which I didn't see.

[Mr Popodopolous]

11 minutes ago, BTRFTG said:

Our direct losses due to Covid in 20/21 were in the region £8-9m. Income was down £11m but operating costs also came down £5m.

Don't think one could bank transfer losses due to Covid, unless we've written off others debt, which I didn't see.

That's a good point- hadn't thought of that, the net saving/loss.

Agreed on transfer losses, that would be spurious- think the calcs by SwissRamble were basicallyquick- Revenue in 2018/19, Revenue in 2019/20 and Revenue in 2020/21.

Lost x in 2019/20, y in 2020/21=revenue lost to Covid. The EFL's exact wording in their regulations is...

Bit vague and wooly? Doesn't seem to state costs net of savings but may mean that.

[Mr Popodopolous]

11 minutes ago, BTRFTG said:

Our direct losses due to Covid in 20/21 were in the region £8-9m. Income was down £11m but operating costs also came down £5m.

Don't think one could bank transfer losses due to Covid, unless we've written off others debt, which I didn't see.

That's a good point- hadn't thought of that, the net saving/loss.

Agreed on transfer losses, that would be spurious- think the calcs by SwissRamble were basicallyquick- Revenue in 2018/19, Revenue in 2019/20 and Revenue in 2020/21.

Lost x in 2019/20, y in 2020/21=revenue lost to Covid. The EFL's exact wording in their regulations is...

Bit vague and wooly? Doesn't seem to state costs net of savings but may mean that.

[Davefevs]

51 minutes ago, Mr Popodopolous said:

That's a good point- hadn't thought of that, the net saving/loss.

Agreed on transfer losses, that would be spurious- think the calcs by SwissRamble were basicallyquick- Revenue in 2018/19, Revenue in 2019/20 and Revenue in 2020/21.

Lost x in 2019/20, y in 2020/21=revenue lost to Covid. The EFL's exact wording in their regulations is...

Bit vague and wooly? Doesn't seem to state costs net of savings but may mean that.

I’ve started adjusting my estimates of “covid allowances” down a bit.  I said before (agree with @BTRFTG) that the cost of creating some of that Income won’t have been incurred.

It won’t be possible to be totally accurate, e.g. how will EFL deal with £x million of lost season ticket revenue, but £y million of increased Robinstv payments?  As you say Swiss Ramble’s calculation a bit quick and dirty.

[CyderInACan]

2 hours ago, Davefevs said:

 As you say Swiss Ramble’s calculation a bit quick and dirty.

Just how I like it 

[Waconda]

7 hours ago, BTRFTG said:

And in 20/21 (including £1.6m of Government Grant income some of which I suspect will be repaid,) wages were 195% of Turnover.

Exclude the Government Grant and wages to Turnover were 212%.

COVID

[BTRFTG]

If you think paying over twice ones total income on staff costs alone, forget all other outgoings, was due to the virus then you're deluded.

 

[Mr Popodopolous]

There is nothing new to report as such but a couple of thoughts did occur if we do fall foul.

Using Derby and Reading as a precedent, we might fall into a) Some kind of embargo situation and b) Wage limits.

Derby

Had FFP and a myriad of other issues. As such they were under some very strong limits indeed, which were 4 signings on a wage not exceeding £4,500 per week. Jagielka and Baldock were emergency signings permitted owing to long term injuries to Bielik and an apparent *ahem* season ending injury to Kazim-Richards

No transfer fee, no loan fee, no permanent contract exceeding 12 months or no loan contract exceeding 6 months- that's for inbound transfers.

As for the squad size and criteria, this was Professional Standing. Professional Standing from memory was one appearance be it start or sub in a relevant competition. Maximum 23, Derby had 19 hence the 4 signings limit.

Unsure how contract extensions were treated but possibly they also fell under EFL jurisdiction to some extent. The EFL eg cancelled one for Jack Marriott last season, I assume it was linked to his wage on an extended contract exceeding embargo limits or similar.

Reading

This was purely linked to FFP. Squad limited to 24 but the criteria were a bit looser- eg they were permitted 6 signings on £8.5k per week per signing. Presumably the expenditure on permitted signings will have been linked to headroom.

They were, are under the established players rule. This was 24 players but with looser criteria than the Derby one.

Obviously no transfer fees, no loan fees, no contracts for new signings exceeding 12 months. Unsure how contract extensions work under this.. 

Of the two Reading would be preferable but neither leave us in a great place if we slide into these restrictions this summer.

Unsure how to square the circle of remaining headroom allocated to a new signings allowance vs a projected breach during the existing season that might need fixing.

[Mr Popodopolous]

Below for those who are interested are explanations of the Embargo types etc.

https://www.efl.com/-more/governance/embargoes/embargoes-faqs/

[Mr Popodopolous]

Still £5m appears to be the magic number in terms of Covid allowances too, although it remains subject to internal debate.

https://www.footballinsider247.com/west-brom-may-force-efl-law-change-as-5m-hangs-in-balance-maguire/

Quick rough calculations for us if it's indeed £5m makes our FFP losses- remember 2019/20 and 2020/21 averaged into one- with that in mind I make it £16-16.5m for us. Perhaps £17m at a push.

The key of course is what were Derby and Reading allowed to exclude once FFP losses calculated in their settlement agreements- both absolute numbers wise and categories. If it was only £5m in the two seasons then precedent set?

[Davefevs]

25 minutes ago, Mr Popodopolous said:

Still £5m appears to be the magic number in terms of Covid allowances too, although it remains subject to internal debate.

https://www.footballinsider247.com/west-brom-may-force-efl-law-change-as-5m-hangs-in-balance-maguire/

Quick rough calculations for us if it's indeed £5m makes our FFP losses- remember 2019/20 and 2020/21 averaged into one- with that in mind I make it £16-16.5m for us. Perhaps £17m at a push.

The key of course is what were Derby and Reading allowed to exclude once FFP losses calculated in their settlement agreements- both absolute numbers wise and categories. If it was only £5m in the two seasons then precedent set?

 

[Hxj]

31 minutes ago, Mr Popodopolous said:

till £5m appears to be the magic number in terms of Covid allowances too

I read this as a fixed COVID allowance for 2021/22 of £5 million per club.

Edited January 24, 2022 by Hxj

[Davefevs]

33 minutes ago, Hxj said:

I read this as a fixed COVID allowance for 2021/22 of £5 million per club.

It seems as if Kieran didn’t know where he got the figure from!

[cidered abroad]

1 hour ago, Mr Popodopolous said:

Still £5m appears to be the magic number in terms of Covid allowances too, although it remains subject to internal debate.

https://www.footballinsider247.com/west-brom-may-force-efl-law-change-as-5m-hangs-in-balance-maguire/

Quick rough calculations for us if it's indeed £5m makes our FFP losses- remember 2019/20 and 2020/21 averaged into one- with that in mind I make it £16-16.5m for us. Perhaps £17m at a push.

The key of course is what were Derby and Reading allowed to exclude once FFP losses calculated in their settlement agreements- both absolute numbers wise and categories. If it was only £5m in the two seasons then precedent set?

@Mr Popodopolous

 Did we get any income for using the South Stan concourse for Covid jabs?