Thats bollox and you know it.
Football Finance
- Thread starter King Binny
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Agreed, very poor journalism. Basically says their turnover will include £300m from Europe and Premier League media deals (probably about right), therefore they have £300m to spend, because they don't have any expenditure this year, that money goes straight to the bottom line.
Telegraph sports pages making as much sense as their far-right-nutter opinion pieces.
Although maybe City have just taken the whole of their wage bill off the books now and the Telegraph is the only media outlet that knows this...
What’s Bollox?
City posted a record PROFIT of £60m odd for the 21/22 season. They’ll likely be able to post the same, if not more for 22/23 given increased revenue and the fact their net spend on transfers for the season was next to fuck all.
Once you understand how players are accounted for and amortised and you take into account that you can have a “loss” of something like £60m over a rolling 3 year period - you get a picture of just how much City could spend without breaching any rules.
Do the math.
We, in theory, “could” spend a bit too, although lots less than city, having, made a smaller profit in 21/22 and likely to not see significant losses in 22/23 - but it’s 23/24 that’s the problem - where our revenue has a Champions League sized hole in it.
We “could” manage a year out of CL and cover it with player sales (not some old fucker worth nothing - someone that people will actually pay top dollar for) but not 2 seasons.
I’m doing this partly as a bit of Devil’s Advocating, but also I do think it’s a discussion worth happening.
I’m not sure I can entirely agree with you on LFC’s value dropping drastically due to not being in the CL or not winning things - we’ll still be in the top 10 most valuable Football teams (I mean Everton are 16th - not as if we’ll fall that far).
Looks like our value, along with other EPL teams jumped massively in 2021 - not sure why, post COVID or new TV deal - any insight @Beamrider
Clearly success (or lack of) has an impact, but I think it’s overstated - as much as I hate thinking of it in these terms, LFC is a strong brand and shouldn’t just fall apart in terms of value depending on who we do or do not sign.
Chelsea spent £600m and not in breach of FFP, Arsenal spent over £500m over 3 seasons without CL football. I don't think FFP is the problem.
The owners don't want to or can't put their own money into the club... Which is fair enough but work out a way to make the club competitive on the field.
That Arsenal spend is over 5 years, not 3.
You have to be careful with Net Spend, because it doesn’t tell the whole picture - for example Liverpool has a high net spend on transfers than Man City over the last 5 years.
That in no way tells the true story.
Youve also got to understand how player transfers are accounted for - the £600m Chelsea spent doesn’t show as £600m spend in their accounts and the way in which they’ll be able to balance it, is by selling players that have little or no book value.
We are not in a position to do that - well, we sort of are, but it would mean selling the likes of Trent, Alisson, Virgil, Salah, or maybe Fabs, Robbo, Jones, Harvey, Irish Kevin or BadgerTits.
Chelsea could effective balance their £600m expenditure for one season by selling Mount, Gallagher & Hudson-Odoi and then another by selling Havertz, Lukaku , Colwill & Pullisc (probably) - there’s a fair chance it’ll bite them in the arse at sone point - but not yet and if City get away with what they did (which they will), FFP can be completely disregarded.
I get that we want the owners to be a little bit more flexible - which they should - there is a way for us to be competitive without having to spend billions - but it involves being smart in the transfer market and being brutal at flipping players when the time’s right - and it’s a risky strategy that could as easily crush us as improve us.
Chelsea are playing an insane game. I don't see which rational club is going to pay good money for Gallagher, CHO, Havertz, Lukaku, Ziyech or Pulisic when it's obvious that these players are unwanted and the market is awash with similar for cheaper. Wishful thinking I know, but I hope Mount and Colwill stay then leave for free when their contracts are up.
There are a lot of irrational clubs out there - Utd will likely pay £70m for Mount, Havertz will get them money - and if you were a mid sized premier league team - like a Villa or West Ham - £50m on Lukaku with Chelsea paying half his wages wouldn’t be a bad idea.
After qualifying for the CL their wage bill will remain low? I read somewhere that if we failed to qualify for next seasons CL the bonuses players get would drop. You mention flipping players, but I remember you arguing with me about why we let so many players walk for free. I would have replied to that thread but because I couldn't remember where it was I didn't. I agree we should be flipping players especially players past their peak and not waiting for them to leave on a free. Thiago and Matip are two examples of we might get £5-10m each but more importantly it saves £17m in wages.
It’s about flipping the right player at the right time. Sometimes it worth keeping older, experienced players rather than the pittance we’d get for them.
Looking at it dispassionately - you want to flip a player with either a low book value or at an amount massively over their book value.
Let’s take Van Dijk - he’s been here long enough that his book value is likely to be very little - so selling him would allow us to lodge a “profit” this season to offset the cost of new players.
But… is he worth selling or retaining for the next few years while a replacement is integrated and releasing on a free.
I think we’ve been hampered that sellable assets like Matip, Gomez, Kieta & Ox have been injured so often and during or in the lead up to transfer windows that their value was so low that we’d have got fuck all, or more likely we’re paying them so much that we’d end up paying half their wages to sell them.
Ideally we’d have had some more sellable youths come through that we could demand £20m+ for, but we haven’t.
We did the right thing flipping Minamino, but probably didn’t get as much as we could have if we’d sold him to a Premier League side.
Then you get back to the problem we have in flipping players - the ones we’ll get good money for, are the players that are key and wouldn’t be easily replaced.
Look at how City do it - flip Sterling, Zinchenko, Jesus, etc for £30m+ - none of which they’ll miss.
That would be equivalent to us selling Jota, Tsimikas & Fabs - which would leave us way short.
You see where I’m going - it’s not just about owners stumping up cash, us buying loads of players or doing a Binomial and selling every player on the books.
Getting rid of those players on frees does allow us to do some smart purchasing - young players with value who we can flip in a few years time for profit - or we bite the bullet and sell off one of the big beasts.
There's very little reason in the value of football clubs. We looked at valuation models and all the conventional bases for valuation just don't apply - usually you'd value a business based on the profits / cash you expect it to generate but most clubs don't make money so that doesn't work. The closest correlation is with turnover so you'll often see an up-tick if the media deals kick up, but not sure that was the case in 2021.
I'd be wary of studies that value clubs and stick to the trend you see in actual deals (but beware outliers - see the huge difference in the values paid for Chelsea and Leeds, for example).
But as I've said before, football clubs are like NFTs - there's fundamentally no value or income stream in them, but people with too much money seem quite keen on spending a lot of cash on them, and as long as there's another sucker waiting in line then they have value, but on any conventional analysis they don't.
I wouldn't assume Chelsea will be OK. They've been teetering on the edge for a long time now and have got away with it through player sales. I suspect, with the sanctions against Abramovich, that their results will be an absolute mess and either they are banking on sympathy or else they know they're fucked so they're really going for it.
On the other hand...
They obviously don't need to worry about UEFA FFP next year and the PL limits are much more generous.
They also have a 30 June year-end, so don't be surprised to see them try to get some sales through in the next few weeks - a deal for Mount will make the numbers look a lot better as it'll be basically 100% profit to the bottom line.
And not all of their spend will hit hard this year - some of those deals were January and on 8-year contracts (UEFA rule change was AFTER those deals, so they may get away with it, not sure PL has copied it). So the January deals will see only 1/16th of the cost hitting their profit this year. Next year, on the other hand, with no Europe and a full hit on those players, they're really in the shit. Can't wait.
If you'll permit me to be a bit geeky for a while, the other thing that hits profits (applicable to Chelsea) is player write-downs (also called impairments).
Player impairment is quite a technical area accounting-wise.
Firstly, the unit over which the valuation test is carried out is not player by player but the squad as a whole. So while some of Chelsea's recent buys already look over-valued, because of the likes of Reece James and Mason Mount (who have high market values but negligible value on the books), their squad as a whole is probably worth as much as the value on their books so there wouldn't be an impairment on the likes of Enzo or Mudryk.
However, these principles only work where a player is "in the squad" at the year end. So when you see player write-offs, it is nearly always in relation to players who are out on loan and therefore not "in the squad" at the year end. And bear in mind that when a high-profile player is out on loan, it's to get as much of their wages off the books as possible because they're not cutting it at the club (and therefore their value is almost certainly questionable). The hope is that the player regains form on loan, making the value sustainable and possibly leading to a sale at break-even or better. The usual outcome is that they stink the place out wherever they go (cough, Arthur Melo, cough) and you end up with a write-down at the end of the year.
In Chelsea's case, step forward Romelu Lukaku, who won't return to the Chelsea squad until 1 July (the day after their year end) and who may therefore trigger a chunky write-down. If I were Chelsea, I'd consider changing the year-end to 31 July to get around this, and also to allow myself a bit more time to get some sales done.
Player impairment is quite a technical area accounting-wise.
Firstly, the unit over which the valuation test is carried out is not player by player but the squad as a whole. So while some of Chelsea's recent buys already look over-valued, because of the likes of Reece James and Mason Mount (who have high market values but negligible value on the books), their squad as a whole is probably worth as much as the value on their books so there wouldn't be an impairment on the likes of Enzo or Mudryk.
However, these principles only work where a player is "in the squad" at the year end. So when you see player write-offs, it is nearly always in relation to players who are out on loan and therefore not "in the squad" at the year end. And bear in mind that when a high-profile player is out on loan, it's to get as much of their wages off the books as possible because they're not cutting it at the club (and therefore their value is almost certainly questionable). The hope is that the player regains form on loan, making the value sustainable and possibly leading to a sale at break-even or better. The usual outcome is that they stink the place out wherever they go (cough, Arthur Melo, cough) and you end up with a write-down at the end of the year.
In Chelsea's case, step forward Romelu Lukaku, who won't return to the Chelsea squad until 1 July (the day after their year end) and who may therefore trigger a chunky write-down. If I were Chelsea, I'd consider changing the year-end to 31 July to get around this, and also to allow myself a bit more time to get some sales done.
This one’s for you @Beamrider
http://www.virtusinterpress.org/IMG/pdf/10-22495_cocv14i1c4art14.pdf
It very much back up what you’re saying about determining a clubs worth.
I’ll be honest - I flipped to the conclusions very, very quickly…
I’d imagine you’ll love this if you haven’t already read it.
http://www.virtusinterpress.org/IMG/pdf/10-22495_cocv14i1c4art14.pdf
It very much back up what you’re saying about determining a clubs worth.
I’ll be honest - I flipped to the conclusions very, very quickly…
I’d imagine you’ll love this if you haven’t already read it.
That's got TLDR written all over it. Need some charts and more numbers!
I kind of like that idea, even though I can’t see it working.
For a start, all the City players would just have “secondary” contracts… or tertiary in their case since they likely already have secondary ones.
It doesn’t take into account things like bonus payments for teams in Europe though, which would be another loophole easily exploited.
But I like the idea of tying spending on wages and transfers, etc to a limit that even the smaller league teams could achieve.
If the likes of City, Chelsea, Newcastle, Arsenal and United are putting their names on this, you know there's loopholes.
It is perfect for City. It makes the competition even more uneven. Most other clubs will follow the rules while they will break them making the competition even more skewed in their favor. Then their army of lawyers will counter sue and get out on a technicality.
Honest question @Beamrider , @StevieM : What is real value in paying so much for football clubs? If I was a multi-billionaire and LFC available for 300 million, I can see the obvious value. But why buy and spend so much on Chelsea, PSG, United (?), City. I dont understand how much City are ploughing into football, the nine or ten clubs worldwide. What is the return? Is being in the news valued so much?
With that amount of money, there are other things you could do to get more ROI, legitimacy, influence? You could hire a top, top, top investor like @Bradley and then double, triple quadruple your wealth? Other investments could be made which are more stable, requires less work.
I think in City’s case it is a brand, gets Ethiad name everywhere, but also, I dunno, when you have that much money - what else do you spend it on.
Also likely future proofing assets spread all over the globe or money laundering or something.
I can’t see how these big Private Equity types hope to extract ROI on something like Chelsea.
Liverpool made since because FSG got it cheap in a fire sale.
Utd - win win for the Glazers - like buying a house and getting some else to not only pay the mortgage but pay you for letting them pay off your mortgage (without actually paying off the mortgage at all).
Saudi’s I guess - why not - not like they actually give a fuck what anyone thinks about them - they kind of do whatever they want.
Fuck knows - I spend all my money on wine and Star Wars stuff - I’m sure my Star Wars Lego helmets would be worth something if I didn’t take them out of the box… but I did - so that’s fucked that.
Sometimes you need to look at the investor more than the investment. As @StevieM says there are all kinds of non-financial reasons why buyers might be interested. But there are also other financial factors to consider. In summary, a football club is, typically, something you buy that doesn't give you annual returns of profit but can deliver a significant gain on disposal.
I think this is why we have seen a lot of interest from US buyers in recent years. The US tax system is quite peculiar in that it allows US tax-payers to buy shares (stock, in their parlance) but treat their investment as if they had bought the underlying assets of the business. This means that the difference between the price they pay for the shares and the book value of the underlying assets can be allocated to goodwill, trademarks, uplift in value of the squad, and written off for US tax purposes over a period of years. So not only does the club not make a (taxable) profit, for US tax purposes it will make an enhanced loss which can be offset against the owner's other taxable income - so it saves them tax on their other income at 39% (or higher if they pay state taxes on top). Then when they come to sell, the gain is taxed at 20%. So it's a tax efficient investment for them, and this probably allows them to bid a little higher than other potential investors and achieve the same ROI.
But I do think vanity plays into it a lot outside the financial aspects. Can't ignore sports washing either, but there's also the question of what else are these people going to do with their money? That's why Bezos wants to go to space, because there's only so many nice houses and race horses you can buy. It's also why so many footballers lose fortunes gambling, because when you have more money than you ever dreamed of, or ever thought you'd need, then you just end up throwing it about. The good guys set up foundations and give something back, but most of them want to feed their egos. Billionaire investors are not that different, they just do it on a much bigger scale.
The question is could we spend £250m this season without any infringement of FFP? We have 3 more seasons with Klopp, now FSG won't or can't put their hands in their pocket, could it be raised by borrowing or renaming Anfield to * Insert Sponsor Here* Anfield
No.
Not without sone sort of debt loading or equity funding I’d imagine.
The naming rights might get about £20m a season - even City haven’t managed to fudge that figure higher.
To spend £250m, we’d need to be selling upwards of £50m each season as well.
With Man U likely to be taken over by the rich LNG Kindoom of Qatar, itt's most likely Man U will see their 21st league title before we see our 20th. Though I'd like FSg gone, I don't blame them for hanging around - they have to do what's right by them, and that's maximising returns.
Its all gone quiet on the investment front, now do you think Henry is waiting on the sale of Man U to conclude who his new partner is or is that they have found a buyer?
Its all gone quiet on the investment front, now do you think Henry is waiting on the sale of Man U to conclude who his new partner is or is that they have found a buyer?
Why? Just because they'll have millions and millions to spend? fat load of good it did for Everton or even Chelsea last year? You could have all the millions and billions in the world but if your footballing foundations are shit then you're just as likely to be pissing it away
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