QPR Finances

[padam]

re Oslo

I got the below from the guy who runs the FFP site via email response .
I also really dont see where you get the £21million loss from as we still have parachute payments for this and next season. The two year rule is for clubs relegated more recently then us.


"The three year cycle is a rolling 3 year period that includes:

The current year (projections will shortly need to be submitted to the Football League)
Last season
The season before last

The accounts for the current year will not have been produced yet (as the season is still underway) - hence the need for projections. The league could sanction a club before the end of the season. So, in theory, a club that overspends could have points deducted before the end of the season and hence might not get promoted. "

[QPROslo]

My projection of massive losses this year is coming from Ferdinand's reference to us being close to breaching the FFP rules yet again this season. If that is the case we would have to lose well above £20m to bring the total loss of the three recent seasons to £39m, given the more moderate losses we had in 2015/2016 and 2016/2017.

If we lost £4m last reason (after correction for costs irrelevant to the FFP rules) and the parachute money has dropped £15m in one year, we could easily lose north of £20m this season, even though our salaries are bound to be a bit lighter. We are probably having a smaller trading surplus on players this season compared to last, which would contribute negatively when comparing to 2016/2017. Other revenues might also be lower, such as gate receipts and sponsorships, even though these are of limited importance relative to the high broadcasting revenues.

[hal9thou]

Have we basically done a deal re FFP? There was talk of a legal challenge via the court of arbitration in sport, presumably the feeling was that we'd better off negotiating. I also think the ECJ ended up deeming FFP sanctions legitimate.

I think all clubs involved in FFP penalisation should negotiate en bloc as a matter of principal, that way they'd have some real muscle. I know Villa fans are pretty concerned at the moment....

[klonk]

Have we basically done a deal re FFP? There was talk of a legal challenge via the court of arbitration in sport, presumably the feeling was that we'd better off negotiating. I also think the ECJ ended up deeming FFP sanctions legitimate.

I think all clubs involved in FFP penalisation should negotiate en bloc as a matter of principal, that way they'd have some real muscle. I know Villa fans are pretty concerned at the moment....

no.

currently the club is appealing against the findings of an arbitration panel which in october 2017 concluded that:

- the ffp rules were not unlawful under competition law; and
- the fine levied by the league on the club was not disproportionate.

the club claims that it remains confident that the appeal will be successful.

no idea about when we might actually get to hear the result of the appeal (and no, nobody outside of the club and the league really has a confirmed figure for what the fine actually is).

[hal9thou]

currently the club is appealing against the findings of an arbitration panel which in october 2017 concluded....

I'm not sure who we're appealing to here, if it is any sort of court then the ECJ ruling of late 2015 does not set a happy precedent. That appeal was concerned with the legitimacy and principals of FFP ie their lawfulness under EU law.

In other words, to sum this up no one actually knows the full extent of the down side, and to date appeals against FFP have ultimately failed.

[klonk]

I'm not sure who we're appealing to here, if it is any sort of court then the ECJ ruling of late 2015 does not set a happy precedent. That appeal was concerned with the legitimacy and principals of FFP ie their lawfulness under EU law.

In other words, to sum this up no one actually knows the full extent of the down side, and to date appeals against FFP have ultimately failed.

That’s my understanding

[Hitman34]

ntroduction: In Between Days

QPR announced their financial results recently for 2016/17, which revealed that they made a loss of over £6 million before tax. Overhanging this is a potential Financial Fair Play (FFP) of somewhere between £40-50 million, which relates to their promotion in 2013/14 in the Championship, which has kept lawyers for both the club and the Football League (EFL) in riches for the last few years.

QPR’s accounts are possibly the most WTF figures in football, as large sums seem to appear and disappear at the whim of owner Tony Fernandes (isn’t he a Steve Coogan creation? Ed) and his entourage of billionaire chums who also own shares in the club.

Income: Never Enough

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Not all clubs have announced their results for 2016/17 yet, but most clubs are showing higher income than in the previous season. The average income of the 16 clubs that have reported to date (which excludes some big hitters such as Newcastle and Leeds) is £32 million.

In 2015/16 the average for a Championship club was £22.9 million. The main reason for the increase is due to a combination of higher parachute payments, along with a new TV deal in the Premier League, which drips down to the Championship in what are called ‘Solidarity Payments.

Like all clubs QPR earn their income from three sources, matchday, broadcasting and commercial/sponsorship.

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The table shows how much Rangers benefitted from being in the Premier League in 2012/13 and 2014/15, but also how much the club is reliant on parachute payments now that they are back in the Championship.

Matchday income was down 5%, which is reasonable considering that Rangers finished 18th, crowds averaged 14,616, up 600 on the previous season.

Broadcast income was up 19%. This was due to the new Premier League TV deal which started in 2017/18. Parachute payments are a fixed percentage of the Premier League equal share payments. Parachute payments will however halve in 2017/18 to about £17.6 million for two seasons. After that date the club will then only be entitled to solidarity payments and a share of the EFL TV deal, which works out about £7 million a year.

QPR presently get about ¾ of their total income from parachute payments, but this will fall, and it’s important that they control costs whilst this is occurring.

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QPR’s commercial income rose 10% to £7.5 million. This was mainly due to new kit manufacturers and shirt sponsors.

Costs: Accuracy

The main costs at a football club are player related, wages and transfer fee amortisation. QPR’s policy since relegation in 2015 is different to when the same thing happened in 2013.

In 2013/14 the approach was to take on the Football League and FFP and pay whatever it took to return to the Premier League.

This time it appears that the club has concentrated on removing some big earners from the wage bill, either by selling players or allowing their contracts to expire.

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Wages fell by a quarter but are still reasonably high by Championship standards, where the average for last season was about £27.3 million.

Amortisation is how clubs deal with transfer fees in the profit and loss account. When a player signs for a club the transfer fee is spread over the life of the contract. Therefore, when Leroy Fer from Norwich for about £9 million on a three-year deal, this works out at about £3 million as an amortisation cost each year.

QPR have spent over £64 million on signings in the last three seasons, which helps explain why the amortisation charge is over £10 million a year. Even taking into consideration players subsequently sold who were with the club in the Premier League, this cost is sizeable, but should fall as player contracts expire.

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Putting these two costs together highlights how much QPR ‘went for it’ in 2013/14, as for every £100 of income generated, there was a £238 cost in terms of wages and amortisation.

Whilst the club was still spending nearly all its income out in wages in the first season relegated (2015/16), it does appear that there is now some sanity in controlling wages in 2016/17.

Losses: Grinding Halt

Losses are income less costs. The bad news for Rangers is that the club lost money last year for the fifth season in a row. The good news is that the losses were only a fraction of those of previous seasons, and the club nearly broke even.

Operating losses are the trading losses of a club, and they exclude interest costs.

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Under FFP rules, QPR can make a maximum FFP loss of £35 million for each season in the Premier League, and £13 million for each season in the Championship. This gives a total of £61 million, so the club, with operating losses in that period of £54 million, appears to be well within that limit. If interest costs are added in, things because a bit more squeaky bum time. QPR had bank/loan interest of £8.9 million over the period, which takes the total loss to £63 million, just over the limit.

The interest costs seem expensive, as the interest rates being charged are £12.6% on £30 million and a payday loan-like 26.8% on £4 million. This approach conflicts with the owners writing off over £240 million of loans elsewhere.



Fortunately, some costs, such as infrastructure, academy and community schemes, are excluded from the FFP calculations. QPR have a category 2 academy, which insiders estimate cost most clubs at least £1.5 million a year. Add in a million and a half depreciation costs a season for other allowable FFP expenses and QPR’s FFP losses are probably about £54-55 million over the last three years.

For the three years ending 2017/18, QPR can have FFP losses of £39 million. Their good performance in 2016/17 in almost breaking even suggests this should be achieved with relative ease.

Player trading: So What?

The accountants treat player trading in a weird way in the accounts. We’ve already shown that when a player is signed, his transfer fee is spread over the life of the contract. When the player is sold, the profit is shown immediately, and it based on the player’s accounting value, not the original transfer fee.

This creates erratic and volatile figures in the profit and loss account.

If we instead focus on the actual purchase and sales, the following arises

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The chart shows what most fans would expect to be the case. In the Premier League clubs spend more on players than they receive from sales, and in the Championship the reverse arises.

What might surprise Rangers fans is that the club has spent so much money (£25 million) in the last two seasons in the Championship on signings, when the general feel is that belts are being tightened.

Debt: Wrong Number

The treatment of debts due to QPR’s owners has been the issue on which the FFP conflict with the EFL has been based.

In 2014 the owners wrote off £60 million of borrowings owed by the club and treated the sum as income. This reduced the losses for 2013/14 from £69 million (which that year would have generated a FFP fine of £40-50 million) to £9 million (which meant no fine).

The owners have subsequently written off further loans of £180 million, but this time the loans were converted into shares, and this has no impact upon profits (or FFP losses).

QPR’s owners have argued that FFP is illegal, and therefore no FFP fine is payable. The EFL argue that FFP is part of their rules, and as such applies to all clubs who choose to play in the league.

The lawyers have grown rich on who is right and who is wrong (and let’s face it, you don’t see too many selling The Big Issue).

The case eventually went to arbitration, and the EFL was successful.

http://www.bbc.co.uk/sport/football/41736013

QPR are not finished though and are refusing to accept the judgement (cue more holiday homes in Barbados for the lawyers).

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If the Football League is successful, then the FFP fine will be paid to charities. Whilst the club would struggle to pay such a large sum, the owners are billionaires, and one would hope they would settle the bill, as it was there decision to ignore FFP initially that caused the dispute.

Summary

QPR have done well in 2016/17 to get their house in order. The final league position reflects the cost cutting at the club, which has continued this year. It looks as if the largesse of the past has been replaced with a more cautious approach to managing the club’s finances. Fans must hope that the owners don’t get bored of being mid table in the Championship and lose all interest in the club.

Until the FFP issue is resolved the club will not look an attractive investment proposition to new potential owners. Crystal Palace have shown that there is space for a small London club to survive and make money in the Premier League, so there will be potential new owners/investors perhaps thinking the same about QPR.

[QPROslo]

I think we have to sell players for £10m to £20m

It looks to me as if most fans do not realize we have to part with some our very best players this summer; even with some of the very promising youngsters. There is definitively no money for a proven goal scorer, as I see it, nor any other important reinforcements.

I am quite sure Ruben is very happy to back the club if he was allowed to, but the FFP rules force us to put in place drastic cost cutting exercises and raise revenue through selling players. I do not refer to the FFP case related to the overspending during the promotion season. The bigger long-term problem is the present FFP rules that set a ceiling of maximum losses over a three-year period of £39m.

We lost £11m during the 2016/2015 season and £6.4m during the 2016/2017 season. The League allows clubs to deduct costs for community work, youth development, women football and depreciation of tangible investments (stadium) when computing the maximum loss under FFP rules. Corrected for these cost items our losses were appr £8.8m and £4.3m respectively for the previous two seasons. The loss this year is in a completely different league. I think we will go on to lose as much as £23-25m.

This is how I get to the figure:
• Our parachute money dropped ca £15m from the previous season to this.
• Our trading surplus from player registrations of £7.3m in 2016/2017 dropped to practically nothing this season.
• Our interest costs have increased at least £3m if the same terms and conditions for the shareholder loans apply as last year.
• Our gate receipt, sponsor income and commercial revenue are likely lower than last year (lower attendance and sponsor deals from the Premier League days running out) – I guess by £1m

All in all this leaves us with a loss, if all other revenue and cost factors stay the same, of around £30m-£31m.

Luckily, we have cut some costs. By disposing off Sandro, Chery, Polter and Henry in first half of 2017 we cut salaries from last season to this, even though we added Goss, Freeman and Smith during the transfer window of January 2017 and Scowen, Baptiste, Smyth, BOS and Wheeler during last summer. We have disposed of Caulker as well, but I do not think we managed to avoid paying his salary until the end of season. Not replacing Curtis Flemming has also made a small saving. As a qualified guess, I think we have cut salaries by £3.0 to £3.5m, which helps, but it is far, far from enough.

We have obviously also had a welcome reduction in amortization costs from the previous season to this. Amortization costs of intangible investments (players transfer fees) are hard to determine without knowing the exact transfer fees and length of contracts. Last season we amortized the remaining part of Sandro, Chery and Polters purchase costs, and possibly JETs acquisition costs from the way I read the annual report. We might have actually saved as much as £4m on lower amortization costs this year.

Correcting for lower salaries and lower amortization costs I estimate this year’s loss to be £23-25m.

This loss keep us inside the £39m threshold this year (£8.8m + £4.3m + maximum £25m = maximum £38.1). Ferdinand said in an interview when explaining lack of signings during the January transfer window of this year that we are close to breaching the FFP rules yet again. I believe this is a confirmation that my estimates are not far off.

So what does this mean for the coming season and the season beyond?

The TV revenue of 2018/2019 is the same as this season as far as I understand. If the costs are the same, we will face another year with losses of £23-25m. Adding up the loss of the previous year (£4.3m), this year (£23-25m) and next year (£23-25m) would see us exceed the FFP limit with £11.3 to £15.3m come end of next season.

This cannot happen of course. I think we will cut salaries by not renewing the contracts of Robinson, Onuoha, Perch, Mackie, JET and a number of fringe players that have already left. We might cut salaries by £4m if we replace them with low cost players.

We will reduce amortization costs yet again, by the absence of the same players, but this time the reduction will be very modest. We will likely make other savings as well, but the interest will keep increasing, as long as the shareholder loans are increasing and T&C stay the same.

I believe we will have to sell players for anything from £7m to £11m this coming summer to comply with FFP rules by end of the 2018/2019 season, and even more if we re-sign any of the players with expiring contracts.

However, the big issue is 2019/2020. Unless we get promoted next season, our parachute money will drop again the following year, this time to zero. That is a further drop of £15ms, of top of yet another increase of interests on shareholder loans. We cannot deal with all of that by disposing of all salable players yet again during the summer of 2019. To add to the problem; one way or another we need to prepare for the FFP fine from the promotion season (which will most likely be much smaller than we are left to believe from media, but still a big headache).

To be ahead of these problems, I guess we will take whatever good or bad offers we get for our players this summer. My guess is that we will sell players for anything from £10m to £20m and continue selling during the following transfer windows.

I guess we will sell Smithies, Freeman, Luongo and either Eze or Smyth this summer.

None of these will be replaced by anything else than Poundland acquisitions.

There is one way out for Ruben: He needs to stop charging interest on his loans, because it is counter-productive and damaging for his own best interests. Whether the club pays the interest or not does not matter. It is anyway affecting FFP calculations. If he replaces convertible interests with some sort of warrants (allowing him to increase his ownership), already from this season, everything would look much better. It will save us more than £20m over the next three years and we can keep hold of most players (we will still be a selling club though). But whether he will do this is yet to be seen. There is no more pressing issues that these interest charges as I see it.

I am sorry to bring the bad news, but let’s be realistic. With no changes done to the interests on shareholder loans things are looking very complicated, with a massive clear out of saleable players this summer.

[qprted]

well smithes could be sold for ten million

[Kevin Mcleod]

I dont think we will sell one single player that plays or is any good.

[Hertford Hoop]

I dont think we will sell one single player that plays or is any good.

Hopefully we won't sell Kev, it would be madness to get rid of any decent players or promising youngsters. Offload high earners and those not performing consistently obviously

[Hitman34]

" Ferdinand said in an interview when explaining lack of signings during the January transfer window of this year that we are close to breaching the FFP rules yet again. I believe this is a confirmation that my estimates are not far off"


holloway said in a recent podcast interview that it was " my decision not to sign a striker so as to give the youngsters a chance".

Someone is lying then.

Anyway, i too can see 3 of the squad being sold off this season. freeman £6-8 mil, luongo £6-8 mil and sylla £1.5-2mil

add to that, the savings in robinsons and neds wages.

[QPRDave]

£10 to £20mill?......That'd be the whole squad and half of next years

[Hitman34]

£10 to £20mill?......That'd be the whole squad and half of next years

#joblot
#buyonegettwofree
#willecceptgiftcards
#qprcash

[Jonny]

I always thought we received parachute income of 24, 16, 10 and 10m for the 4 years since relegation as per original reports, however, something must of changed as in year 1 (15/16) we actually received 29.1m and year 2 (16/17) we received even more at 31.1m ! As a result, i am rather perplexed but someone might be able to explain why. Does it also mean we will receive more than us fans are anticipating for year 3 and 4? Because if so, this would have extremely positive implications to your model!