Fulham Finances and what would it take to make Fulham self-sustaining?

[BalDrick]

'assuming thats what you meant by one for me, 19 for you'

Yes it is - a Beatles lyric (think the bass line from Start by The Jam).

So if the top flight is not our natural level, for financial reasons, what is?

Championship? There are some pretty large average attendances at that level.

Good question - because there are bigger clubs than us in the Championship I suspect. Of course a huge amount depends on quite what level of our support is fly-by-night (no bad thing per se, all clubs have them).

[richie17]

Surely the key to all of this financial sustainability is to bring through youngsters from the academy. No large transfer fees in, no large signing on fees, lower wages initially at least until they are well established and the transfer out of a few marginal ones for fees or a transfer out of another Smalling every so often. Sadly there seems to be few signs of this so far.

Charlton are a good comp as well.  If we go down we'll be doing that sort of thing I suspect, league 1/championship, depending on how the ball bounces and what have you.  

The main thing is that if we do drop, we do it in a controlled manner and don't do a Hull, as a serious financial mess at Fulham will surely lead to asset stripping and that could be very painful in the wrong hands.  Surely not an issue while MAF and his family are about, but you never know what's around the corner.  

[ImperialWhite]

'assuming thats what you meant by one for me, 19 for you'

Yes it is - a Beatles lyric (think the bass line from Start by The Jam).

So if the top flight is not our natural level, for financial reasons, what is?

Championship? There are some pretty large average attendances at that level.

Good question - because there are bigger clubs than us in the Championship I suspect. Of course a huge amount depends on quite what level of our support is fly-by-night (no bad thing per se, all clubs have them).

Between 5-10k are Prem glory hunters, I'd estimate based upon early cup games   :005:

Not a good or a bad thing probably - but the fact is that whatever football fans say, we're all fickle glory hunters to some degree and there's a reason Man United get 60-70k every week and Stockport County get 5k every week. And it ain't the colour of the shirts.

[AlFayedsChequebook]

Surely the key to all of this financial sustainability is to bring through youngsters from the academy. No large transfer fees in, no large signing on fees, lower wages initially at least until they are well established and the transfer out of a few marginal ones for fees or a transfer out of another Smalling every so often. Sadly there seems to be few signs of this so far.

Charlton are a good comp as well.  If we go down we'll be doing that sort of thing I suspect, league 1/championship, depending on how the ball bounces and what have you.  

The main thing is that if we do drop, we do it in a controlled manner and don't do a Hull, as a serious financial mess at Fulham will surely lead to asset stripping and that could be very painful in the wrong hands.  Surely not an issue while MAF and his family are about, but you never know what's around the corner.  

The saving grace (and hopefully the reason that we wont do a Charlton) is MAF and his £160m unsecured loan. If we offloaded the wages (and I assume we have a relegation wage drop clause in each players contract) then we would be relatively fine in terms of finances.

[MJG]

Surely the key to all of this financial sustainability is to bring through youngsters from the academy. No large transfer fees in, no large signing on fees, lower wages initially at least until they are well established and the transfer out of a few marginal ones for fees or a transfer out of another Smalling every so often. Sadly there seems to be few signs of this so far.

Charlton are a good comp as well.  If we go down we'll be doing that sort of thing I suspect, league 1/championship, depending on how the ball bounces and what have you. 

The main thing is that if we do drop, we do it in a controlled manner and don't do a Hull, as a serious financial mess at Fulham will surely lead to asset stripping and that could be very painful in the wrong hands.  Surely not an issue while MAF and his family are about, but you never know what's around the corner. 

The saving grace (and hopefully the reason that we wont do a Charlton) is MAF and his £160m unsecured loan. If we offloaded the wages (and I assume we have a relegation wage drop clause in each players contract) then we would be relatively fine in terms of finances.

From the accounts:
Other Commitments
The maximum commitment for additional transfer fees payable in respect of future possible appearances amounts to £8M (2009 £7.39M).

[NorthernWhite]

I think there will a lot of "exceptions" posted deep in the accounts.

The facts are, our income increased from 63.145 million to 76.398 million. Our salaries accross the board only increased from 41.376 million to 43.788 million. We had to pay for the transfer of Duff and Greening in that financial year which would be around 7-8 million but we MAY have received the cash for Smalling. Hard to say when that cash was received ie January or July but we do know it was the highest upfront payment we've received for a player. I know we had the extra costs of the Europa games but that would have been a very small fraction of the additional 13.25 million income we received last year.

There's no way we could have lost a figure of 17 million without some very large exceptions being taken into consideration so it's fair to assume MAF is taking money back out of the club at some point.

[White Noise]

I think there will a lot of "exceptions" posted deep in the accounts.

The facts are, our income increased from 63.145 million to 76.398 million. Our salaries accross the board only increased from 41.376 million to 43.788 million. We had to pay for the transfer of Duff and Greening in that financial year which would be around 7-8 million but we MAY have received the cash for Smalling. Hard to say when that cash was received ie January or July but we do know it was the highest upfront payment we've received for a player. I know we had the extra costs of the Europa games but that would have been a very small fraction of the additional 13.25 million income we received last year.

There's no way we could have lost a figure of 17 million without some very large exceptions being taken into consideration so it's fair to assume MAF is taking money back out of the club at some point.

NW - I think the extra TV money starts from this financial year and the increase in turnover you detail above is almost entirely due to the Europa. Some good points though and you may be interested in the discussion here -

http://www.friendsoffulham.com/forum/index.php?topic=10793.0

[Scrumpy]

Blimey we have some clever people on this board. :Sparkyticus:

Can you guys give the rest of us a summary that we can understand, once you've figured out all the 'exceptions' etc.? Cheers.

[The Equalizer]

You also need to take into account depreciation for players. AJ, valued at £10million 2 years ago would have that value deducted over the term of the contract, so £3million of that sum is probably from him alone.

Nowt to be worried about.

[Senior Supporter]

You also need to take into account depreciation for players. AJ, valued at £10million 2 years ago would have that value deducted over the term of the contract, so £3million of that sum is probably from him alone.

Nowt to be worried about.

It is very difficult to pinpoint the makeup of the figure for depreciation of players in any one year, as their cost in each case will be written off over the period of their contract. So, whilst there will still be a "write off" in the year for the likes of Hangeland, Zamora, Gera and Pantsil, the figure in respect of new players brought in will be only a proportion of their actual cost.

Do any of you know what happens when a player has his contract extended before the original one ends? Is the write off of any value remaining on the books extended to the new expiry date or not?

[RidgeRider]

I think there will a lot of "exceptions" posted deep in the accounts.

The facts are, our income increased from 63.145 million to 76.398 million. Our salaries accross the board only increased from 41.376 million to 43.788 million. We had to pay for the transfer of Duff and Greening in that financial year which would be around 7-8 million but we MAY have received the cash for Smalling. Hard to say when that cash was received ie January or July but we do know it was the highest upfront payment we've received for a player. I know we had the extra costs of the Europa games but that would have been a very small fraction of the additional 13.25 million income we received last year.

There's no way we could have lost a figure of 17 million without some very large exceptions being taken into consideration so it's fair to assume MAF is taking money back out of the club at some point.

I am not well versed on accounting practices in the UK or for Sports franchises in general but, we have been running at a loss for some time. My guess is "Eq" has identified part of the answer if in fact you can depreciate an asset (a player) based on transfer fee paid and spread that depreciation over the life of his initial contract. My guess is a club will depreciate on as rapid a schedule as possible. I'm also guessing you are probably correct he may have liquidated some funds out of the club.

I did see the 2008/2009 Annual report, which I am now going to go back and see how much non-income/expense accounting, basically things like depreciation, was done in that year to get an idea on what they do.

[timmyg]

Here in the states, NFL and MLB owners make obscene amounts of money, but they have figured out how to use asset depreciation and other such fiddles to make it look like 75% of the franchises are losing money. That way, they don't have to pay so much in tax breaks. Additionally, many/most of them -- millionaires/billionaires all -- have figured out a way for tax-payers to build new stadia. Then, they then jack up the seat prices so hight that the tax payers who built the damn thing with their money can't afford to attend. Meanwhile corporations, already richer from stupid tax cuts last decade, write off their corporate boxes as business expenses, so that the individual bloke gets nailed a third time.

So, Mo? Even the Russian down the road may not be losing all that money that you see on the paper. It's harder to fiddle the tax man in the UK then it is in the states, but they didn't get to be bloody rich by being bloody stupid.

Also Don, and anyone else interested, the basic structure of ownership here is very different than in England. Here, owners of sports teams are usually a part of some larger conglomerate so it's easier shift the money around within their network (no-media-pun intended) and subsequently hide the true earnings come tax time.

Here, owners walk an odd line between acting like they're broke, when they're not; yet not actually revealing how much money they may have lost in one season.

For owners of Fulham, or Chelsea, or United -- the club is it. Chelsea or United can't hide low gate receipts or club box sales in the revenue they get from Chelsea or MUTV like the Red Sox can do with NESN (a fact I think will hit John Henry this summer).

Anyway, yeah back to Fulham -- I'm not surprised. When United played in every sort of final a few years back and still just barely broke even, it proved this sport is a loser's game monetarily-wise and needs fixing.

[AlFayedsChequebook]

You also need to take into account depreciation for players. AJ, valued at £10million 2 years ago would have that value deducted over the term of the contract, so £3million of that sum is probably from him alone.

Nowt to be worried about.

It is very difficult to pinpoint the makeup of the figure for depreciation of players in any one year, as their cost in each case will be written off over the period of their contract. So, whilst there will still be a "write off" in the year for the likes of Hangeland, Zamora, Gera and Pantsil, the figure in respect of new players brought in will be only a proportion of their actual cost.

Do any of you know what happens when a player has his contract extended before the original one ends? Is the write off of any value remaining on the books extended to the new expiry date or not?

Not sure about that last point, I read somewhere that the Amortisation of the player fee stops when their original contract ends, but if they get an extension before that point (as most do) then I am not sure.

[Chopper]

I need some of this financial stuff put into some very simple pictures to fully understand it but it does seem to me that there's a lot of smoke and mirrors going on when it comes to club accounts. Probably no surprise there as that is the way of the world as far as businesses are concerned. Doesn't help us get to grips with exactly where we stand financially though.

I guess we're the first of many to announce losses over the last FY.

Also, I was the one saying about enjoying it while it lasts but even if we get relegated and face a dramatic fall down the leagues I'd still enjoy watching football at Fulham. It's not all about the Premier League, but I do feel lucky to have been around at what is likely to be the most "successful" in our history. Makes me even more determined to see a decent showing in the domestic cups before it all goes south.

[White Noise]

I think the simple picture is that

1) The increase in our turnover was almost entirely due to the Europa League £12m.

2) The debt of around £160 million to MAF did not increase in the year - and therefore, in that sense, we were self-sustaining.

3) We made a modest loss on player trading because the Smalling payment, in the main seems to be in more small chucnks than previously thought.

4) When you strip out player write-downs and depreciation in value we actually amde a pre-tax profit of £4 million on the year. We presumably chose to write down the values (ie Joe Kamara in the accounts as being worth the £6.5 million we paid for him but Fulham then write that down to £1 million) to create a loss on paper so that we didn't make profit. The accumulated 'losses' of the last 13 years must mean we have never paid a penny of tax under MAF. (In fact - have we paid any since the 60's?)

5) The bottom line is in we are in pretty good shape compared to previous years and MAF has committed in the accounts to keep investing.

[MJG]

I think the simple picture is that

1) The increase in our turnover was almost entirely due to the Europa League £12m.

2) The debt of around £160 million to MAF did not increase in the year - and therefore, in that sense, we were self-sustaining.

3) We made a modest loss on player trading because the Smalling payment, in the main seems to be in more small chucnks than previously thought.

4) When you strip out player write-downs and depreciation in value we actually amde a pre-tax profit of £4 million on the year. We presumably chose to write down the values (ie Joe Kamara in the accounts as being worth the £6.5 million we paid for him but Fulham then write that down to £1 million) to create a loss on paper so that we didn't make profit. The accumulated 'losses' of the last 13 years must mean we have never paid a penny of tax under MAF. (In fact - have we paid any since the 60's?)

5) The bottom line is in we are in pretty good shape compared to previous years and MAF has committed in the accounts to keep investing.

See i'm having trouble with your last point. A couple of season ago we made a small profit and looked like were going in the right direction with regards finance. Then we have two bloody good years on the pitch and we make a massive loss. The accounts still show a £200M debt.
He has committed to invest but there is no obligation to continue to do so.

[Chopper]

4) When you strip out player write-downs and depreciation in value we actually amde a pre-tax profit of £4 million on the year. We presumably chose to write down the values (ie Joe Kamara in the accounts as being worth the £6.5 million we paid for him but Fulham then write that down to £1 million) to create a loss on paper so that we didn't make profit. The accumulated 'losses' of the last 13 years must mean we have never paid a penny of tax under MAF. (In fact - have we paid any since the 60's?)

Thanks WN

I think point 4 is the key one, no? It's all about the tax.

[FurMan]

See i'm having trouble with your last point. A couple of season ago we made a small profit and looked like were going in the right direction with regards finance. Then we have two bloody good years on the pitch and we make a massive loss. The accounts still show a £200M debt.
He has committed to invest but there is no obligation to continue to do so.

The debt is certainly a problem, and if MAF, for whatever reason, ever demanded repayment that would pretty much be it for the club's sustainability.

However, if you make the assumption that we retain premier league status (a major assumption I know) and that MAF turns the debt into equity (which has been done at other clubs), Fulham is getting closer to self sufficiency.

The loss on the P&L really doesn't mean anything, it's all just accounting. Fulham has an incentive to post losses so that, as previously mentioned, they can avoid tax. You can show all the profits you want, but a company's ability to make money is what matters (look at Enron).

The club made money this season despite paying back some of MAF's loan and a small net spend on players, which I think is really good sign.

[Tom]

How much does the club get for just being in the Prem?

[richie17]

TV money interests me.  On the one hand, Sky could easily lower their offer next time the contract's up, as they seem to have lost that non-UK broadcast in the UK case (Portsmouth landlady) so their package isn't as strong as they thought when they bought it.  This would screw the clubs, but of course it's in Sky's interests to keep the quality of the league high (if they pull the money away the good players will leave, the league won't be so enticing to advertisers, fewer subscriptions, and so on), so we might be alright on that one.   But maybe not.  If Sky doesn't rely on the football (and I have no idea whether it does) then we might one day have an ITV digital situation on a much bigger scale.   At which points all the clubs who have overreached are instantly fecked.