Fulham Debt, Turnover & Wages

[White Noise]

http://www.guardian.co.uk/football/2011/may/19/premier-league-finances-black-hole?CMP=twt_gu

Record income but record losses for Premier LeagueIn his annual analysis of Premier League finances our award-winning writer looks into the game's black hole

David Conn guardian.co.uk, Thursday 19 May 2011 01.15 BST


Randy Lerner, Aston Villa's US owner, struggles to compete with clubs whose commercial income and potential is greater than his own. Photograph: Nick Potts/PA Archive/PA


The Premier League's 20 clubs collectively lost close to half a billion pounds last year despite making record income, a Guardian analysis of their most recent accounts has revealed. In the 2009-10 financial year, the clubs currently in the Premier League made total revenues of £2.1bn, principally from their billion-pound TV deals and the world's most expensive tickets. Yet 16 of the 20 clubs made losses, totalling a record £484m, and the same number relied on funding from their wealthy owners.

Since the owners took over their clubs, they have put in a staggering £2.3bn, by way of loans or for shares, mostly to pay ever-escalating players' wages and transfer fees. The Premier League's total wage bill in 2009-10 was £1.4bn, an average £70m per club, accounting for an average 68% of the clubs' income, once Arsenal's exceptional profit from selling flats in the old Highbury stadium is discounted.

This picture of Premier League clubs making fortunes in the gilded bubble of national and worldwide popularity, but failing to control players' wages, making huge losses and relying on owners, poses a major question about whether they can reform in time to meet Uefa's financial fair-play rules. Clubs will be permitted to record losses of only €45m (£39.7m) altogether over the three seasons from 2011-12 to 2013-14, and cannot rely on owners' subsidies, if Uefa is to sanction their participation in European competitions.

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All the clubs in the top seven made substantial losses except Arsenal, whose record income of £382m, and £56m profit, were swollen by £156m made from the Highbury development. By far the biggest loss was at Manchester City, where Sheikh Mansour of Abu Dhabi put his dynastic oil millions into bankrolling a £121m deficit from signing and paying the galactic wages of players who could lead City to trophies. Across Manchester, United made £286m turnover, more than any other club if Arsenal's property income is discounted – yet the costs and interest on the debts the Glazer family have loaded on to the club, pushed United into a losing £79m.

Double winners in 2009-10, Chelsea, whose owner Roman Abramovich is always cited as a supporter of financial fair play, made the next biggest loss, £78m. Tottenham's successful push for Champions League qualification was achieved with a £7m loss and £15m investment from the owners, principally Bahamas-based currency speculator, Joe Lewis. Aston Villa lost £38m as the club's US owner, Randy Lerner, struggles to compete with clubs whose commercial income and potential is much greater than Villa's. Liverpool made revenues of £185m, more than double that of Villa, yet lost £20m, in the last full season owned by Tom Hicks and George Gillett, who had borrowed £200m to buy Liverpool then made the club responsible for paying their interest.

Even among the four clubs which avoided making losses, only one, Wolverhampton Wanderers, did so by making a substantial, convincing
profit. Arsenal's remarkable-looking £56m profit was hugely boosted by the club's £156m income from the Highbury apartment sales, and Arsenal moved into making a £6m loss in the six months from May to November last year.
Of the other non loss-making clubs, Birmingham City's profit was very small, and the club is now considered the Premier League's major financial headache, struggling with a cash shortfall which could tip into crisis if Birmingham fall into relegation this weekend. West Bromwich Albion, considered a soundly-run club resigned to a habitual yo-yo existence, made a small £500,000 profit in 2009-10, when they were in the Championship, not the Premier League.

Wolves' £9m profit stands out among all 20 clubs, yet it was made in the first season up from the Championship with new Premier League TV income pouring into Molineux. The Wolves owner, Steve Morgan, believes he can crack the challenge of establishing the club in the Premier League while not taking excessive financial risks.

Yet the overall losses on this scale, £484m in total, and net debts of £2.5bn, £400m more than the clubs' total turnover, do not in fact mean the 20 clubs are mostly in financial difficulties. Most of the losses are soaked up by huge financial contributions from club owners whose wealth looks more stable than has been true of the Premier League in the recent past.

The four clubs not bankrolled by owners were Arsenal, whose shareholders last month pocketed a combined £243m selling to Stan Kroenke, but never put a penny into the club itself, West Bromwich Albion, Everton and Manchester United. The Glazer family's ownership has cost United around £350m in interest, fees, loans to the family themselves and bank charges since 2005, and they have never put money into the club. In the year to June 30 2010, United paid £42m interest on the £500m loans the Glazer family originally took out to buy the club in the first place, and just refinancing that debt, replacing the loans with a bond, cost United an eyewatering £65m, cash.

The Glazers, though, are the exceptions in causing money to be taken out of their club, particularly with Hicks and Gillett, the other US "leveraged buyout" practitioners, forced out of Anfield. Most owners have put huge finance in, yet one of the most extraordinary aspects of this subsidy is how small a proportion of it has financed anything permanent, whether stadium-building or other club infrastructure. Almost all the stadiums were already built or refurbished when the current generation of owners bought the clubs. So the overwhelming proportion of the £2.3bn the owners have contributed has gone on paying transfer fees, superstar wages and other expenses, beyond what the clubs could otherwise afford.

At Manchester City, the prime example, Sheikh Mansour's investment is up to £493m in less than three years. City have improved the Carrington training ground, built a new office block and made other relatively inexpensive improvements, but the Eastlands stadium was already built, with £132m public and lottery money, well before Mansour bought the club. Most of Mansour's half a billion has been spent paying the transfer fees and near £10m-a-year wages each for players such as Carlos Tevez, Yaya Touré, David Silva and the others City would never have been able to afford without Mansour's patronage.

While Mansour, Abramovich, Lerner and Fulham's Mohamed Al Fayed, whose loans to Fulham increased to £187m, are high-profile figures, subsidies from less prominent owners are nevertheless huge. Peter Coates' family, who own online gambling company bet365, have invested £43m in Stoke City, US private equity investor Ellis Short £47m in Sunderland and the little-known, Isle of Man-based Edwin Davies has taken to £85m his financial ballast of Bolton Wanderers, whose loss last year was £35m.

The figures illustrate the multiple challenges facing Premier League clubs to comply with financial fair play. Clubs must not only stop paying players and their agents continually inflating wages which were already incomprehensible years ago to most of the world's population. Fans are concerned, particularly in England, that Uefa's sensible principle that clubs should rely on income, not owners, will have the unintended consequence of leading to increased ticket prices.

That has already happened at Arsenal, and this week Liverpool, owned by John Henry's Fenway Sports Group, announced 6.5% ticket price rises, to the club's loyal, generally not wealthy fanbase who must live in the real world, where there is a recession going on.

[finnster01]

Great article Mr WN. Thanks for sharing.  :clap_hands:

Some very interesting numbers and food for thought there, especially Wolves 9 million profit

[White Noise]

Wages for last season

1) Chelsea - £174m
2) Man City - £133m
3) Man Utd - £131m
4) Liverpool - £121m
5) Arsenal - 110m
6) Villa - £80m
7) Spurs - £67m
8=) Sunderland - £54m
8=) Everton - £54m
8=) West Ham - £54m
11) Fulham - £49m
12=) Blackburn - £47m
12=) Newcastle - £47m (Championship)
14) Bolton - £46m
15) Stoke - £45m
16) Wigan - £39m
17) Birmingham - 38m
18) Wolves - £30m
19) West Brom - £23m (Championship
20) Blackpool - £13m (Championship)

[ImperialWhite]

Villa spend £80m on wages!?! They've underachieved recently...

[Whiteroom]

How are we going to deal with all that debt? Will Mo ever get repaid, and if so, how? I didn't realise it was SO big.

[finnster01]

Based on the wages compared to league table now:

Overachievers:
Stoke, West Brom and possibly Blackpool (if they stay up)

Underperformers:
West Ham, Villa, Liverpool

[White Noise]

Turnover for last season

1) Arsenal - 382m (£156m property dev)
2) Man Utd - £286m
3) Chelsea - £213m
4) Liverpool - £185m
5) Man City - £125m
6) Spurs - £119m
7) Villa - £91m
8) Everton - £79m
9) Fulham - £77m
10) West Ham - £72m
11) Sunderland - £65m
12) Bolton - £62m
13) Wolves - £61m
14) Stoke - £59m
15) Blackburn - £58m
16) Birmingham - 56m
17) Newcastle - £52m (Championship)
18) Wigan - £43m
19) West Brom - £28m (Championship
20) Blackpool - £9m (Championship)

[finnster01]

How are we going to deal with all that debt? Will Mo ever get repaid, and if so, how? I didn't realise it was SO big.

Mo will get repaid when he sells (plus all the tax writeoffs he has used over the years against the Harrods profits). Further, the debt can be restructured is several ways, including converting it to equity should it be required (similar to what Chelsea did)

[ImperialWhite]

How are we going to deal with all that debt? Will Mo ever get repaid, and if so, how? I didn't realise it was SO big.

Mo will get repaid when he sells (plus all the tax writeoffs he has used over the years against the Harrods profits). Further, the debt can be restructured is several ways, including converting it to equity should it be required (similar to what Chelsea did)

But surely we will then just owe the money to the new owner?

[Hammer Smith]

WN, according to your figures which I recall from reading the Guardian earlier today, we are above Sunderland in our total annual turnover, not below them, which gives us the 9th highest turnover in the Premier League. Who would have ever thought that this was possible from "Little Old Fulham" when we were languishing at the bottom of Division Three in our worst ever season in the nineties...So there is a bright side to all this debt ridden analysis, assuming that the Premier League and international football more generally are collectively ever able to get to grips with the spiralling wages problem although I have strong doubts that this will ever happen....

[finnster01]

How are we going to deal with all that debt? Will Mo ever get repaid, and if so, how? I didn't realise it was SO big.

Mo will get repaid when he sells (plus all the tax writeoffs he has used over the years against the Harrods profits). Further, the debt can be restructured is several ways, including converting it to equity should it be required (similar to what Chelsea did)

But surely we will then just owe the money to the new owner?

Yes and no. If the loans are kept as loans on the books, those loans will be repaid by the new owner as part of the deal as they belong in essence between MAF and Fulham. So new owner will pay back MAF and Fulham is debt free. Everyone happy, right? Not quite, it depends on how the new owner finances the purchase. If he does a Glazer/Hicks where he puts the club up as collateral and borrow against it, we will in fact be worse off because we will now have to pay interest on top (which we do not currently do to MAF. Hence Man U's ridicules interest expenditure as the Glazer to not invest back in the club ).

If the loans are converted to equity and the club is sold, the new owner will own all shares and since Fulham is a privately held company, the value of those shares will in essence have to be assessed by an independent accounting firm taking all assets and liabilities into consideration. Again the financing behind the purchase of the shares could be done as above, hence we would be truly Donald Ducked again.

Best thing we can hope for is MAF not selling or that another MAF like type comes in

[White Noise]

WN, according to your figures which I recall from reading the Guardian earlier today, we are above Sunderland in our total annual turnover, not below them, which gives us the 9th highest turnover in the Premier League. Who would have ever thought that this was possible from "Little Old Fulham" when we were languishing at the bottom of Division Three in our worst ever season in the nineties...So there is a bright side to all this debt ridden analysis, assuming that the Premier League and international football more generally are collectively ever able to get to grips with the spiralling wages problem although I have strong doubts that this will ever happen....

Thanks Perry. Good spot. I will ammend it now.

[mrska]

So are we in trouble? i didnt think i was thick but i can make head nor tail of these figures..

[finnster01]

So are we in trouble? i didnt think i was thick but i can make head nor tail of these figures..

Short answer is no, as long as MAF is still kicking around

[AlFayedsChequebook]

So are we in trouble? i didnt think i was thick but i can make head nor tail of these figures..

Short answer is no, as long as MAF is still kicking around

I think the real key is what happens when Mo either sells or passes away.

We can hope that there will be a seamless transfer to an owner with similar intentions (a club for prestige), which seems unlikely. Much more likely will be a Blackburn style live for a few years off of whatever Mo leaves the club and then be sold to someone who does not really have the interests of the club at heart.

Of course, one of his son's may take over.

[White Noise]

The other thing to bear in mind is that Premiership turnovers/revenues are rising rapidly every year. Our turnover last year was £77m but in 10 years time it might be twice that or more whereas the debt probably won't have grown by anything like the same amount.

Every year the proportion of debt to turnover is decreasing and this should continue as turnover rises and the club pays MAF back - which it has started to do. So, at the moment, we are in less trouble with each passing year.

[Whiteroom]

The other thing to bear in mind is that Premiership turnovers/revenues are rising rapidly every year. Our turnover last year was £77m but in 10 years time it might be twice that or more whereas the debt probably won't have grown by anything like the same amount.

Every year the proportion of debt to turnover is decreasing and this should continue as turnover rises and the club pays MAF back - which it has started to do. So, at the moment, we are in less trouble with each passing year.

Thats encouraging. Do we know whether mo's son's are at all interested in Fulham?

[White Noise]

The other thing to bear in mind is that Premiership turnovers/revenues are rising rapidly every year. Our turnover last year was £77m but in 10 years time it might be twice that or more whereas the debt probably won't have grown by anything like the same amount.

Every year the proportion of debt to turnover is decreasing and this should continue as turnover rises and the club pays MAF back - which it has started to do. So, at the moment, we are in less trouble with each passing year.

Thats encouraging. Do we know whether mo's son's are at all interested in Fulham?

Omar & Karim are both on the board I think. They seem very quiet, thoughtful chaps but always seem to have been interested in the club. I seem to recall that they were evident in the removal of Sanchez.

[The Equalizer]

The other thing to bear in mind is that Premiership turnovers/revenues are rising rapidly every year. Our turnover last year was £77m but in 10 years time it might be twice that or more whereas the debt probably won't have grown by anything like the same amount.

Every year the proportion of debt to turnover is decreasing and this should continue as turnover rises and the club pays MAF back - which it has started to do. So, at the moment, we are in less trouble with each passing year.

Thats encouraging. Do we know whether mo's son's are at all interested in Fulham?

Omar & Karim are both on the board I think. They seem very quiet, thoughtful chaps but always seem to have been interested in the club. I seem to recall that they were evident in the removal of Sanchez.

That's good enough for me! Sign em up!