Great news re the clubs financial position

[QPROslo]

I have just read through the annual accounts for 2017/2018 which is actually very good news, despite a total loss including the FFP fine of £37.5m.

In a post from summer of 2018 I predicted an operative loss for 2017/2018 for FFP calculations purposes of £23-25m. Because of this I predicted sales of players of minimum £10m to make sure we comply with the maximum three year loss of £39m by end of this season.

I admit I was very surprised we only sold one player during last summer - Smithies for ca £3.5m. I couldn't get my head around it. Moreover, I was even more surprised we could afford Wells, Hemed, Cameron and Rangel. I cannot imagine a loan fee for the first two of anything less than £1m per year per player.

In my post of last summer I said it was one way out of the mess, and that was an end to the interest charges on Rubens loan to the club. Ruben charged interest of £5.8m in 2016/17. In addition came interest charges of banks, bringing total finance costs just above £6m. I assumed interest charges would increase by a further £3m in 2017/18, taking interest costs to £9m to reflect increased financing by Ruben.

The great news is that Ruben made the loan interest free from the summer of 2017. As far as I know this is completely new information. Moreover, he provided financing in order to pay down the £4m bank loan. This completely changed the picture around. Interest costs for 2017/2018 was a tiny £21.000.

Operational loss of 2017/2018 was ca £22.5m. Corrected for depreciation of ca £1,5m and youth and women football costs the total loss for FFP purposes seems to be ca £20.3m. Given that the loss for FFP calculation purposes was approximately £4,5m in 2016/2017 it means we are allowed to loose around £14m this season without breaking the rules. We will lose a lot less, but I won't bore you with my estimate of this years loss.

The end to interest charges means a big burden is taken off the shoulders of the club. It means we have £9-10m more to spend this season than we otherwise would, and the same applies for the coming seasons.

It does not mean we are out of the financial trouble, but it is way easier.

I must admit this is the best piece of news we have received for a very long time. Thanks a lot, Ruben!

[HertsHoops]

I don't pretend to understand anything more than the basics, but welcome news if Ruben not charging interest on his loan - every little helps

[qprjeff1882]

I have just read through the annual accounts for 2017/2018 which is actually very good news, despite a total loss including the FFP fine of £37.5m.

In a post from summer of 2018 I predicted an operative loss for 2017/2018 for FFP calculations purposes of £23-25m. Because of this I predicted sales of players of minimum £10m to make sure we comply with the maximum three year loss of £39m by end of this season.

I admit I was very surprised we only sold one player during last summer - Smithies for ca £3.5m. I couldn't get my head around it. Moreover, I was even more surprised we could afford Wells, Hemed, Cameron and Rangel. I cannot imagine a loan fee for the first two of anything less than £1m per year per player.

In my post of last summer I said it was one way out of the mess, and that was an end to the interest charges on Rubens loan to the club. Ruben charged interest of £5.8m in 2016/17. In addition came interest charges of banks, bringing total finance costs just above £6m. I assumed interest charges would increase by a further £3m in 2017/18, taking interest costs to £9m to reflect increased financing by Ruben.

The great news is that Ruben made the loan interest free from the summer of 2017. As far as I know this is completely new information. Moreover, he provided financing in order to pay down the £4m bank loan. This completely changed the picture around. Interest costs for 2017/2018 was a tiny £21.000.

Operational loss of 2017/2018 was ca £22.5m. Corrected for depreciation of ca £1,5m and youth and women football costs the total loss for FFP purposes seems to be ca £20.3m. Given that the loss for FFP calculation purposes was approximately £4,5m in 2016/2017 it means we are allowed to loose around £14m this season without breaking the rules. We will lose a lot less, but I won't bore you with my estimate of this years loss.

The end to interest charges means a big burden is taken off the shoulders of the club. It means we have £9-10m more to spend this season than we otherwise would, and the same applies for the coming seasons.

It does not mean we are out of the financial trouble, but it is way easier.

I must admit this is the best piece of news we have received for a very long time. Thanks a lot, Ruben!

Hi Oslo, you mention we have £9-£10 million more to spend this season....... By that do you mean the current one we're playing or next season. Could it be that we've purposely not spent anything on transfer fees last summer in order to give us more spending power this summer. Also given the fact we have a lot of players out of contract could possibly release more money if their contracts are not renewed. Hope the club are very busy looking at targets. It's clear we need help. Lets hope we can bring in some gems like Freeman in the summer.

[djp]

Is this really good news? Doesn't sound too great to me. So assuming the loss for FFP is £20.3m for 2017-18 and we do lose £14m this season, then it leaves us only £4.7m allowed losses for 2019/2020 season. Taking into consideration that we will lose £16.6m parachute payment next season (according to Wiki but don't know how accurate that is), we will be £21.3m down next season. How are we going to make up for that? Can see Freeman/Luongo/Eze going in the summer. Hope we don't have to cash in on the likes of Chair and Smyth this soon too.

Can now also understand why none of those senior players have signed contracts yet, can't see any of them staying after end of season. Will be an U23 team next season. And we really will be in the #### if we did go into freefall and end up getting relegated this season, as FFP allowed losses are even less in League One, will end up playing our U18 team.

Hopefully I am thinking about this the wrong way but really concerned about it.

[YoungR1]

Thanks Oslo, interesting read, one question though, is Ruben not breaking any rules by stopping interest mid-way through an agreed loan? Just paranoid about these Fair Play Police out to get us, looking for us breaking the 'rules' again.. Hopefully we'll be allowed to spend the extra 9-10M on players next season too? There's bound to be some 'rule' that we can't!

[Jonny]

Is this really good news? Doesn't sound too great to me. So assuming the loss for FFP is £20.3m for 2017-18 and we do lose £14m this season, then it leaves us only £4.7m allowed losses for 2019/2020 season. Taking into consideration that we will lose £16.6m parachute payment next season (according to Wiki but don't know how accurate that is), we will be £21.3m down next season. How are we going to make up for that? Can see Freeman/Luongo/Eze going in the summer. Hope we don't have to cash in on the likes of Chair and Smyth this soon too.

Can now also understand why none of those senior players have signed contracts yet, can't see any of them staying after end of season. Will be an U23 team next season. And we really will be in the #### if we did go into freefall and end up getting relegated this season, as FFP allowed losses are even less in League One, will end up playing our U18 team.

Hopefully I am thinking about this the wrong way but really concerned about it.

What most don’t factor in when doing these calculations about the loss of the parachute payments, is that championship-based tv income then kicks in. It is circa 10m. And probably gone up based on the new championship tv deal.

So the gap between 16m (premiership parachute loss) and 10m is (championship tv income) is in fact approx 6m, not 16m. That makes a huge difference in terms of the reality of our situation, which is slowly but steadily moving towards self-sustainability.

[djp]

What most don’t factor in when doing these calculations about the loss of the parachute payments, is that championship-based tv income then kicks in. It is circa 10m. And probably gone up based on the new championship tv deal.

So the gap between 16m (premiership parachute loss) and 10m is (championship tv income) is in fact approx 6m, not 16m. That makes a huge difference in terms of the reality of our situation, which is slowly but steadily moving towards self-sustainability.

Thanks for that clarification Jonny, that's good to know and does make a massive difference. I am assuming teams cannot get both the Championship tv money and Premiership parachute payment? Otherwise those coming down are really at a massive advantage.

It is still going to be a struggle financially next season too, but for the 2020-21 season we should be able to kick on as the 2017-18 Accounts with the big loss are no longer applicable for FFP purposes.

[davieqpr]

I predict that FFP will be changed again in 2-3 years because there are going to be so many players out of work. So many contracts will not be renewed in the summer to go on top of the 280 from last year. The main thing is out of contract Championship players are not being signed by League 1 clubs . Any team without parachute payments will have to cut cost.
Our parachute payment loss is £9.6m ( third season ).

[Jonny]

Thanks for that clarification Jonny, that's good to know and does make a massive difference. I am assuming teams cannot get both the Championship tv money and Premiership parachute payment? Otherwise those coming down are really at a massive advantage.

It is still going to be a struggle financially next season too, but for the 2020-21 season we should be able to kick on as the 2017-18 Accounts with the big loss are no longer applicable for FFP purposes.

Correct, clubs cannot get both forms of TV income.

[Jonny]

I predict that FFP will be changed again in 2-3 years because there are going to be so many players out of work. So many contracts will not be renewed in the summer to go on top of the 280 from last year. The main thing is out of contract Championship players are not being signed by League 1 clubs . Any team without parachute payments will have to cut cost.
Our parachute payment loss is £9.6m ( third season ).

Parachute payments for year 3 and year 4 are circa 16m. We are on a 4-year parachute model.

You are referring to the new premier league parachute payments structure that is a 3-year model - which we are excempt from as contracts were signed before this all changed.

[SheepRanger]

I cannot see an operating loss of £22m being seem as anything but worrying. As has been stated but added four expensive loans into the team, paid off Olly and recruited an expensive new manager. This investment surely cant be sustained unless the owners are happy to lose the FFP limit of £30m every three years

[QPROslo]

Is this really good news? Doesn't sound too great to me. So assuming the loss for FFP is £20.3m for 2017-18 and we do lose £14m this season, then it leaves us only £4.7m allowed losses for 2019/2020 season. Taking into consideration that we will lose £16.6m parachute payment next season (according to Wiki but don't know how accurate that is), we will be £21.3m down next season. How are we going to make up for that? Can see Freeman/Luongo/Eze going in the summer. Hope we don't have to cash in on the likes of Chair and Smyth this soon too.

Can now also understand why none of those senior players have signed contracts yet, can't see any of them staying after end of season. Will be an U23 team next season. And we really will be in the #### if we did go into freefall and end up getting relegated this season, as FFP allowed losses are even less in League One, will end up playing our U18 team.

Hopefully I am thinking about this the wrong way but really concerned about it.

It is good news that we don't pay millions in interest charges any longer. We knew already two years ago that the 2017/20128 accounts would look like a disaster, but due to the end of interest charges the financial result turned out substantially better than expected. However, more importantly, 2018/2019 and coming seasons will be much, much easier than feared.

I have always anticipated players such as Freeman, Eze, Luongo etc would leave soon, either during the past January transfer window or this coming summer. Moreover, I thought none of the contracts that expire soon would be renewed, including among others Lynch, Wzsolek and Bidwell.

With up to £9m saving in interest costs per year we have much more maneuvering ability than I anticipated - that's what I mean with "good news". I cannot read it in any other way. However, the fact we still had an operational loss of £22.5m last season and a loss corrected for none-FFP items of £20.3m is of course worrying as you say, but it nevertheless feels great to do much better than anticipated.

In short, this is what it means:

The loss of 2018/2019 (when none-FFP items are deleted) is likely in the region of £7-10m. The assumption is based on ca £20.3 m loss for 2017/2018 corrected for £6m less costs for amortizations of intangible assets (as the contracts of players such as Caulker, Onuoha, Robinson, JET etc came to an end), £3.5m in income from the Smithies deal and general cost cutting such as lower salaries (hard for me to estimate an amount) and lower legal fees (they were probably very high in the past, due to the FFP fight).

If we assume a loss this season right in the middle of my £7-10m estimate, i.e. a loss of £8.5m, we are allowed to lose up to £10.2m next season while still staying inside the £39m FFP threshold. We will receive £6m less in TV revenue next season (£16m less in parachute payment, but £10m for Championships TV rights), meaning we will have to cut cost with only £4.3m compared to this season, if my estimate is correct. This is much, much lower than it would be if we kept on paying interest charges in the region of £9m annually. If this years loss is higher or lower we would need to save respectively more or less next season - but whatever way you look upon it we need to undertake considerably less cost savings than we were left to believe before we learned about the change of interest costs. Those supporters that never took time to run the math might not be relieved, as they did not understand the grim financial outlook, but all those that looked into the figures will feel very happy.

If the need for savings is just £4.3m we will manage with ease. I guess Hemed and Wells cost us £2m each (loan fee + salary), so such a limited saving is definitely within reach without jeopardizing our squad for next season.

While we are about to get out of the mess a lot of other Championship clubs are right at the start of it. We are soon facing a more level playing field, where we are not severely handicapped.. We should strongly resist changes to FFP rules, now that we are soon through it while others are about to enter it.

[Jonny]

It is good news that we don't pay millions in interest charges any longer. We knew already two years ago that the 2017/20128 accounts would look like a disaster, but due to the end of interest charges the financial result turned out substantially better than expected. However, more importantly, 2018/2019 and coming seasons will be much, much easier than feared.

I have always anticipated players such as Freeman, Eze, Luongo etc would leave soon, either during the past January transfer window or this coming summer. Moreover, I thought none of the contracts that expire soon would be renewed, including among others Lynch, Wzsolek and Bidwell.

With up to £9m saving in interest costs per year we have much more maneuvering ability than I anticipated - that's what I mean with "good news". I cannot read it in any other way. However, the fact we still had an operational loss of £22.5m last season and a loss corrected for none-FFP items of £20.3m is of course worrying as you say, but it nevertheless feels great to do much better than anticipated.

In short, this is what it means:

The loss of 2018/2019 (when none-FFP items are deleted) is likely in the region of £7-10m. The assumption is based on ca £20.3 m loss for 2017/2018 corrected for £6m less costs for amortizations of intangible assets (as the contracts of players such as Caulker, Onuoha, Robinson, JET etc came to an end), £3.5m in income from the Smithies deal and general cost cutting such as lower salaries (hard for me to estimate an amount) and lower legal fees (they were probably very high in the past, due to the FFP fight).

If we assume a loss this season right in the middle of my £7-10m estimate, i.e. a loss of £8.5m, we are allowed to lose up to £10.2m next season while still staying inside the £39m FFP threshold. We will receive £6m less in TV revenue next season (£16m less in parachute payment, but £10m for Championships TV rights), meaning we will have to cut cost with only £4.3m compared to this season, if my estimate is correct. This is much, much lower than it would be if we kept on paying interest charges in the region of £9m annually. If this years loss is higher or lower we would need to save respectively more or less next season - but whatever way you look upon it we need to undertake considerably less cost savings than we were left to believe before we learned about the change of interest costs. Those supporters that never took time to run the math might not be relieved, as they did not understand the grim financial outlook, but all those that looked into the figures will feel very happy.

If the need for savings is just £4.3m we will manage with ease. I guess Hemed and Wells cost us £2m each (loan fee + salary), so such a limited saving is definitely within reach without jeopardizing our squad for next season.

While we are about to get out of the mess a lot of other Championship clubs are right at the start of it. We are soon facing a more level playing field, where we are not severely handicapped.. We should strongly resist changes to FFP rules, now that we are soon through it while others are about to enter it.

There is no way we paid any kind of loan fee for any players, Lee Hoos recently confirmed as much. Further we are not paying full whack salary either, around 50% for each of wells, Hemed and Cameron. Toshington, Sylla and Smithies salaries essentially cancel out the above wages. We have approx 8m coming off the wage bill for this seasons accounts. So from 30m down to 22m from last season accounts (just posted) to this.

[SheepRanger]

I thought all interest payments were merely converted to shares which effectively dilluted Tony's holding down to 5%. What is his holding in the latest accounts?

[QPROslo]

I thought all interest payments were merely converted to shares which effectively dilluted Tony's holding down to 5%. What is his holding in the latest accounts?

You are right, SheeRanger, but whether interest is paid in cash or shares do not influence the P&L - it is a cost either way. Look at 2016/2017 accounts and you see that interest costs were £6m despite the fact they were converted to shares.