Richard Hughes

[StevieM]

It’s not though. He’s given a budget per contract and player most likely.

Which likely means if he goes over the budget, it affects the ability to sign other players.

Can you imagine what would happen on here if we gave bumper new contracts to Mo, Virg & Trent and then announced that we we’re unlikely to make any significant other moves in the market as we’d blown our budget.

 

[Best Believe It]

It isn't just the situation with Virgil, Mo and Trent. We've got others that will have a year on their contract come the summer. He may not have been responsible for running the contracts down of those three, but he's letting it happen for the others.

 

[Beamrider]

Which likely means if he goes over the budget, it affects the ability to sign other players.

Can you imagine what would happen on here if we gave bumper new contracts to Mo, Virg & Trent and then announced that we we’re unlikely to make any significant other moves in the market as we’d blown our budget.

Techy post, but illustrates that compliance with UEFA rules will be easier if we renew the three players. Hadn't really thought this through until now so here goes and hopefully you can follow this:

@StevieM is correct, although the impact on the budget is not just about the increase in the salaries.
The UEFA rule takes into account both wages AND amortisation. Because all three of the guys due for renewal are nearing the end of their contracts, the amortisation charges for them going forward will be negligible on the historic fees paid for them. To explain, when a contract is extended, whatever is left in terms of book value is then amortised over the length of the new contract.
So taking Virgil as an example, I reckon his book value at the start of the current financial year was about £11m. If we were to renew today, that value would be about £2.6m. Let's say we give him a new 3-year deal, that £2.6m is written off over 3 years - about £860k per annum. At present, he's costing that much PER MONTH. So top-line is that we'd save around £9m per annum against our (current) costs for the FCR. However, there would also be an agent fee on the contract renewal which will be spread over three years and likely take £1-2m off that saving.
At present, I reckon the trio is costing us the following in amortisation:
Trent - £0.7m
Mo - £5.5m per annum
Virgil - £9m per annum.
So we could accommodate a certain amount of wage increase (plus agent fee on renewal) for these three without massively increasing our costs for the Football Costs Ratio calculation. That gives us more to play with on recruitment in summer. The club will absolutely be forecasting the FCR and trying to comply with the UEFA limit.
We're also going to have a much higher level of income versus last year given Champions League in both the current year and next year, which helps bring the target ratio down nearer to a compliant position.
It is still going to be a lot easier to hit the target ratio by renewing these guys. To the extent that we need to buy new players to replace them, let's say £200m combined fees, then that will add £40m of amortisation per annum to the FCR costs budget, plus or minus any difference on wages (I'm assuming the new guys would be on less money than the current trio).

 

[MomoWASright]

It was reported a few days ago that we want them to stay but won’t break the bank. There is quite obviously a limit to what we feel their wage can be given their age. Same with 2 or year contract which has also been mentioned.

Richard Hughes negotiates with the budget he’s given.

I seem to remember FSG set budgets and investment for exceptional items (Anfield expansion, training ground, etc) and the hierarchy within the club set the budget for the club operating independently of FSG. That would mean FSG have nothing to do with the contracts.

 

[peterhague]

So the ideal scenario is to let the contracts run down to zero before renewing them. But then you run the risk of the players just leaving and then having to charge loads of amortisation on the fees for replacements.

Interesting.

That scouse journalist Tony Evans was on talksport the other day saying the club want Salah and VVD to take pay cuts and that they'd both stay for the same money. He thinks both will leave. Not sure how much he knows tbf.

 

[MomoWASright]

Techy post, but illustrates that compliance with UEFA rules will be easier if we renew the three players. Hadn't really thought this through until now so here goes and hopefully you can follow this:

@StevieM is correct, although the impact on the budget is not just about the increase in the salaries.
The UEFA rule takes into account both wages AND amortisation. Because all three of the guys due for renewal are nearing the end of their contracts, the amortisation charges for them going forward will be negligible on the historic fees paid for them. To explain, when a contract is extended, whatever is left in terms of book value is then amortised over the length of the new contract.
So taking Virgil as an example, I reckon his book value at the start of the current financial year was about £11m. If we were to renew today, that value would be about £2.6m. Let's say we give him a new 3-year deal, that £2.6m is written off over 3 years - about £860k per annum. At present, he's costing that much PER MONTH. So top-line is that we'd save around £9m per annum against our (current) costs for the FCR. However, there would also be an agent fee on the contract renewal which will be spread over three years and likely take £1-2m off that saving.
At present, I reckon the trio is costing us the following in amortisation:
Trent - £0.7m
Mo - £5.5m per annum
Virgil - £9m per annum.
So we could accommodate a certain amount of wage increase (plus agent fee on renewal) for these three without massively increasing our costs for the Football Costs Ratio calculation. That gives us more to play with on recruitment in summer. The club will absolutely be forecasting the FCR and trying to comply with the UEFA limit.
We're also going to have a much higher level of income versus last year given Champions League in both the current year and next year, which helps bring the target ratio down nearer to a compliant position.
It is still going to be a lot easier to hit the target ratio by renewing these guys. To the extent that we need to buy new players to replace them, let's say £200m combined fees, then that will add £40m of amortisation per annum to the FCR costs budget, plus or minus any difference on wages (I'm assuming the new guys would be on less money than the current trio).

Could the club also be considering inflation? If we extend Virgil and Mo to kick that can down the road 2 years but by the time that comes around we’d have to pay an extra 20% on wages, transfer and agent fees compared to getting them in this summer.

 

[MomoWASright]

So the ideal scenario is to let the contracts run down to zero before renewing them. But then you run the risk of the players just leaving and then having to charge loads of amortisation on the fees for replacements.

Interesting.

That scouse journalist Tony Evans was on talksport the other day saying the club want Salah and VVD to take pay cuts and that they'd both stay for the same money. He thinks both will leave. Not sure how much he knows tbf.

He lost all credibility with the Chinese are coming.

It’s an interesting point though. We could be offering a lower base wage and if they keep performing as they have done this season they still get paid the same as this.

 

[Beamrider]

Could the club also be considering inflation? If we extend Virgil and Mo to kick that can down the road 2 years but by the time that comes around we’d have to pay an extra 20% on wages, transfer and agent fees compared to getting them in this summer.

I think that's a big gamble. Reality is that if inflation is an issue then we'll be as well placed as any other club in Europe to deal with it (due to our revenue growth), plus inflation is invariably driven by revenue growth - the revenue grows, the players and their agents come along and take it away.
The only time I saw an inflation gamble pay off was the year Edwards moved early in the window, getting all our business done before the prices went up. What you're talking about is a "long game" version of that. I think the Edwards strategy worked because he was able to predict inflation across a short period (and because the selling clubs didn't see it coming), but it's harder to do that over a longer period.
I also think, as always, that we will move early if we see an opportunity, rather than being railroaded into paying above the odds.

 

[Beamrider]

So the ideal scenario is to let the contracts run down to zero before renewing them. But then you run the risk of the players just leaving and then having to charge loads of amortisation on the fees for replacements.

Interesting.

That scouse journalist Tony Evans was on talksport the other day saying the club want Salah and VVD to take pay cuts and that they'd both stay for the same money. He thinks both will leave. Not sure how much he knows tbf.

Yes re contracts, but to be clear (and you didn't suggest otherwise) I don't think it would be a deliberate ploy here - the risk of losing the players would be too great.
It wouldn't surprise me if they'd tried to build in a reduction in salary given player aging, but I'd have thought they'd probably look at an up-tick in year one and then reduce over the length of the contract. I know we've tried to do that in the past. If it were me, I'd probably go with that on basic pay, but with the ability of the players to trigger parity with their current position through performance bonuses - i.e. sustain your current performance, you get the same (or possibly better) money. Decline and you don't.

 

[Hansern]

Tony Evans is a massive cunt. Wouldnt listen to a word he says.

 

[Hansern]

I seem to remember FSG set budgets and investment for exceptional items (Anfield expansion, training ground, etc) and the hierarchy within the club set the budget for the club operating independently of FSG. That would mean FSG have nothing to do with the contracts.

Richard Hughes wont have any sort carte blanche in regards to wages and fees.

 

[Beamrider]

It’s not though. He’s given a budget per contract and player most likely.

He will more likely have an overall budget. The way things used to work, we would forecast a simple roll-out of the existing contracts - in terms of how they affected cash flow - and calculate how much spare cash would be available. Football would then be free to spend that cash, theoretically, however they saw fit, but they would have to stay within those parameters. If they sold players, the profit on sale / wages saved would go back into the budget. Their job was to use the money to maintain a balanced squad that did what the manager needed.
The scenario as to who would leave, who would join, who would have their contract renewed, would change several times a week in the run-up to the transfer window, and more frequently still during the window itself (usually in the window it was the costs, rather than the ins and outs, that changed).
So from the perspective of the finance function at LFC, so long as they came in at or below budget they could do what they liked.
Beyond that, there would be a regular dialogue with FSG on strategies. We were never party to those discussions but certainly in the Klopp years Jurgen would probably get what he wanted, so long as it was within budget (and occasionally when it wasn't). The role of the Hughes type would then be to get it done. I suspect the dynamic is slightly different under Slot who doesn't, yet, have the clout that Klopp had, but I suspect if he really had his heart set on something then it would happen (and historically, Edwards did NOT want to sign Benteke, but Brendan prevailed, and Comoli didn't want Carroll but FSG prevailed).
What I'm not clear on is how the hierarchy works now. Hughes will report into Edwards, but I'm not sure how much autonomy Edwards has - i.e. whether he is the person with whom the buck stops or if there is still some further oversight from AN Other at FSG. And I also suspect Edwards will place a lot of trust in Hughes, meaning Hughes will usually get what he thinks is best, but given Edwards's past experience he is also in a good position to sign-off on decisions and to understand if/when we are over-paying.

 

[keniget]

He will more likely have an overall budget. The way things used to work, we would forecast a simple roll-out of the existing contracts - in terms of how they affected cash flow - and calculate how much spare cash would be available. Football would then be free to spend that cash, theoretically, however they saw fit, but they would have to stay within those parameters. If they sold players, the profit on sale / wages saved would go back into the budget. Their job was to use the money to maintain a balanced squad that did what the manager needed.
The scenario as to who would leave, who would join, who would have their contract renewed, would change several times a week in the run-up to the transfer window, and more frequently still during the window itself (usually in the window it was the costs, rather than the ins and outs, that changed).
So from the perspective of the finance function at LFC, so long as they came in at or below budget they could do what they liked.
Beyond that, there would be a regular dialogue with FSG on strategies. We were never party to those discussions but certainly in the Klopp years Jurgen would probably get what he wanted, so long as it was within budget (and occasionally when it wasn't). The role of the Hughes type would then be to get it done. I suspect the dynamic is slightly different under Slot who doesn't, yet, have the clout that Klopp had, but I suspect if he really had his heart set on something then it would happen (and historically, Edwards did NOT want to sign Benteke, but Brendan prevailed, and Comoli didn't want Carroll but FSG prevailed).
What I'm not clear on is how the hierarchy works now. Hughes will report into Edwards, but I'm not sure how much autonomy Edwards has - i.e. whether he is the person with whom the buck stops or if there is still some further oversight from AN Other at FSG. And I also suspect Edwards will place a lot of trust in Hughes, meaning Hughes will usually get what he thinks is best, but given Edwards's past experience he is also in a good position to sign-off on decisions and to understand if/when we are over-paying.

Interesting stuff.

RE: one party not wanting a player and another who does prevailing. Is there any blowback if it doesn't work out or is there more of a ya win some and ya lose some mentality?

I'd like to think that truly disastrous signings (such as those you used as examples) severely weaken the hands of those that push for them.

 

[Dirty Sanchez]

Maybe we’re waiting to see what happens with 115. If they get off scott free then perhaps our owners will start to spend with wild abandon.

Before you post some triggered bullshit, please understand that I am joking.

 

[Hansern]

He will more likely have an overall budget. The way things used to work, we would forecast a simple roll-out of the existing contracts - in terms of how they affected cash flow - and calculate how much spare cash would be available. Football would then be free to spend that cash, theoretically, however they saw fit, but they would have to stay within those parameters. If they sold players, the profit on sale / wages saved would go back into the budget. Their job was to use the money to maintain a balanced squad that did what the manager needed.
The scenario as to who would leave, who would join, who would have their contract renewed, would change several times a week in the run-up to the transfer window, and more frequently still during the window itself (usually in the window it was the costs, rather than the ins and outs, that changed).
So from the perspective of the finance function at LFC, so long as they came in at or below budget they could do what they liked.
Beyond that, there would be a regular dialogue with FSG on strategies. We were never party to those discussions but certainly in the Klopp years Jurgen would probably get what he wanted, so long as it was within budget (and occasionally when it wasn't). The role of the Hughes type would then be to get it done. I suspect the dynamic is slightly different under Slot who doesn't, yet, have the clout that Klopp had, but I suspect if he really had his heart set on something then it would happen (and historically, Edwards did NOT want to sign Benteke, but Brendan prevailed, and Comoli didn't want Carroll but FSG prevailed).
What I'm not clear on is how the hierarchy works now. Hughes will report into Edwards, but I'm not sure how much autonomy Edwards has - i.e. whether he is the person with whom the buck stops or if there is still some further oversight from AN Other at FSG. And I also suspect Edwards will place a lot of trust in Hughes, meaning Hughes will usually get what he thinks is best, but given Edwards's past experience he is also in a good position to sign-off on decisions and to understand if/when we are over-paying.

Thanks, very interesting. Given Slots comments in his latest press conference that he wants Virgil to stay it seems odd if some compromise isn't found on the contracts if Hughes can call the shots.

My comment was more in the fact that for all the flack Hughes gets its not soley down to him to get the contracts done. Its as you say a broader picture of strategy and finance.

 

[Beamrider]

Thanks, very interesting. Given Slots comments in his latest press conference that he wants Virgil to stay it seems odd if some compromise isn't found on the contracts if Hughes can call the shots.

My comment was more in the fact that for all the flack Hughes gets its not soley down to him to get the contracts done. Its as you say a broader picture of strategy and finance.

Yes, I think that's totally fair. If he were working for City and money were no object, Hughes could have done these deals ages ago, and there will be all kinds of issues he needs to manage, such as:
1. Creating precedents for players over 30 which we know has been an issue for FSG in the past
2. Other squad players wanting parity or increases in line with the players concerned
3. Any over-spend on these three guys affects the budget for summer; as does..
4. Letting any of them go - adds replacement cost
I'd expect they'll have a number of scenarios covered - having to replace all three and curtail other summer spending, keeping them all and having more to spend, and all kinds of scenarios in-between.

 

[Beamrider]

Interesting stuff.

RE: one party not wanting a player and another who does prevailing. Is there any blowback if it doesn't work out or is there more of a ya win some and ya lose some mentality?

I'd like to think that truly disastrous signings (such as those you used as examples) severely weaken the hands of those that push for them.

I recall Edwards being properly pissed off over Benteke. I suspect when things started to go tits up for Brendan that Edwards wouldn't have been telling FSG to keep him on. It's just normal office politics in many respects, but with bigger numbers attached. Your ability to ride it out will depend on how much credit you have in the bank. So if Slot were to dig his heels in over something this summer, if it didn't work out he could point to his record of winning the league with what he inherited and ride it out (plus I suspect his ego would allow him to admit he got it wrong). Brendan didn't have that, particularly the humility to admit when he was wrong.

 

[Hansern]

Yes, I think that's totally fair. If he were working for City and money were no object, Hughes could have done these deals ages ago, and there will be all kinds of issues he needs to manage, such as:
1. Creating precedents for players over 30 which we know has been an issue for FSG in the past
2. Other squad players wanting parity or increases in line with the players concerned
3. Any over-spend on these three guys affects the budget for summer; as does..
4. Letting any of them go - adds replacement cost
I'd expect they'll have a number of scenarios covered - having to replace all three and curtail other summer spending, keeping them all and having more to spend, and all kinds of scenarios in-between.

James Pearce had, for once, a good point today regarding that previously the March international break was used to plan for the summer transfer window. But now, given the uncertainty about these 3 contracts we have be ready for multiple scenarios as you say.

 

[keniget]

I recall Edwards being properly pissed off over Benteke. I suspect when things started to go tits up for Brendan that Edwards wouldn't have been telling FSG to keep him on. It's just normal office politics in many respects, but with bigger numbers attached. Your ability to ride it out will depend on how much credit you have in the bank. So if Slot were to dig his heels in over something this summer, if it didn't work out he could point to his record of winning the league with what he inherited and ride it out (plus I suspect his ego would allow him to admit he got it wrong). Brendan didn't have that, particularly the humility to admit when he was wrong.

Makes sense. I was just wondering that within the "transfer committee" (if there still is one) if you get one badly wrong or a few wrong, that your vote starts to count a little bit less, credit in the bank or not. Should do anyways!