Fulham Finances - are we skint this summer?

[Admin]

http://cravencottagenewsround.wordpress.com/2012/07/03/fulham-finances/

Reader Douglas McNeill wrote the following about Fulham's Finances. Enjoy...

With Euro 2012 over, the summer transfer market will soon be getting underway in earnest.  So I thought that it might be instructive to take a look at Fulham's finances.  I earn my living in the City analysing the finances of listed companies, and a football club isn't so very different.
Apart from the fact that the transfer window is open, there are a couple of other reasons why it's worth examining this subject.  First, the ideas associated with 'Moneyball' often come up for discussion on this site.  It might help us if we knew more about the kind of money Fulham has available to play this intriguing game.  Second, recent events at Glasgow Rangers suggest that conventional sports journalism is ill-equipped to hold club owners to account over their financial stewardship.  Heaven forbid that Fulham should ever go the way of Rangers – but if it did, it might help if fans were asking awkward questions before the point of no return was reached.

***

This isn't the first blog entry about football finance: take a look at the excellent Swiss Ramble and AndersRed for some superb examples.  But I want to take a slightly different approach.  First, I want to focus less on profits and more on cash flow.  That's because profitability in football is hugely skewed by the depreciation of transfer fees, and its cousin – transfer market profits and losses.  For me, it's more meaningful to look at the amount of cash coming in and going out – and I fancy that MAF thinks in those terms too.

Second, I want to try and do a bit of forecasting.  Unlike listed companies, which have to report financial results pretty soon after their fiscal year ends, football clubs usually take months to file their accounts at Companies House.  Fulham's financial year ends on 30 June, but the accounts don't typically appear in public until the following February or later.  I think that some intelligent speculation is in order to fill that gap – and help us think about our prospects in the summer transfer window.

***

So, what is there to say about the finances of 'Fulham Football Leisure Ltd'?  Here are ten observations.

1.    Chairman Mo has been wonderfully generous – but not recently.  His last big cash injection was in 2007-08, the season of the Great Escape. He put in over £20m that year, mostly to fund Sanchez's summer spree in the transfer market – Kamara, Davis, Konchesky, Baird, and others.  Hodgson spent some more when he arrived in the January, on Hangeland and (Eddie) Johnson.  The fees weren't disclosed, but it looks to me as though they cost about £3m in total.

2.    Since then, outgoings have more or less been matched by income.  And that's despite at least one relatively costly signing in each season: (Andy) Johnson in 2008-9 (the 7th place finish); Duff in 2009-10 (Hamburg); Dembele in 2010-11 (the Hughes year); and Ruiz in 2011-12.  A self-sufficient football club – now there's something you don't see every day!

3.    The Europa League has been good to us.  Sure, it doesn't bring the kind of riches you get in the Champions' League.  But we did make £12.5m out of the run to Hamburg, and I reckon we would have made £8-9m this season, despite going out at the group stage.  That's because the bulk of the TV revenue is awarded just for getting to the group stage – and the lion's share of it goes to clubs from countries with large TV markets, like England.  So that's £20m over the past three seasons.  To put that in context, it's roughly the amount we paid to buy Duff, Dembele and Ruiz.  Without the Europa League, would we have those players?

4.    But most of the money comes from the Premier League.  About half of it, in fact, just for taking part.  Then roughly another quarter comes from gate receipts – mostly league games, of course – and the Sky/ESPN/BBC deals.

5.    Our players earn about 40 grand a week.  That's my best guess, anyway.  We know that about two-thirds of the club's income goes on pay – for everyone at the club, not just the players.  Invoking the old 80/20 rule, for want of anything better, would suggest that the playing squad is collectively paid about £40m.  That's for about 60 players (!) and again, I'd guess that 80pc of it goes to the 20-odd leading players. In which case, they're getting about £40,000 a week, on average.  That ties in which press reports I've seen regarding the wages of Duff and Zamora, before he left.  Just remember – the average at big clubs is probably at least twice that.

6.    Jol has probably balanced the books in his first year.  Ruiz and others cost about £15m, and Zamora, Greening and Dikgacoi brought in about half that, leaving a shortfall that was covered by the Europa League proceeds.  But they won't recur in this coming season, so...

7.    ...Jol might have to bring in £5m more than he spends in the transfer market this year (i.e. the summer window plus the January window).  That's what I think it would take to keep cash inflow in line with cash outflow.  Of course, MAF may decide that he's willing to cover a net cash outflow.  Otherwise, a plausible scenario is that Jol raises £20m by selling Dembele and Dempsey, and gets to spend £15m of it.

8.    Alternatively, he could achieve much the same effect by not replacing the big earners who have been released this summer (Johnson and Murphy).  If they were on 40 grand a week, they'd have getting on for £5m a year between them.  That wouldn't prevent Jol making other new signings – they'd just have to be on packages similar to the other players we've released (Grygera, Riise BH, Sa and the Pog).  It's a fair bet that 31-year old Mladen Petric falls into that category.

9.    All this was probably the scenario that Hughes could see coming a year ago.  So when he talked about "lack of ambition" perhaps that's what he had in mind.

10.    Change is afoot.  First, there's the Premier League's monster new broadcasting deal with Sky and British Telecom.  Second, there's our proposed stadium expansion.  If there's enough interest, I'll write on another occasion about how these developments might affect Fulham's fortunes – and the money at Jol's disposal.

[VicHalomsLovechild]

Interesting post. Have you assessed any other clubs?

[The Rock]

Great post admin. Cuts to the point. We only need 2 or 3 players - 2 fwds and an RB maybe. We're solid and that bit of quality is the only money that should be spent if I'm running a business.

[Me-ate-Live, innit??]

36 people have read this without reply and I wonder if it depressed them as much as it does me.  :
Don't get me wrong now Sonny,  You  make a good case  for us going tits-up
and your point about Mark Hughes is believable

I reckon we should get rid of the droves of stewards and with the money saved we could get a decent striker !



OOps !!!!

[Mr_Moon]

This isn't admin's posts or thoughts. Should probably click on the link.

[nevzter]

36 people have read this without reply and I wonder if it depressed them as much as it does me.  :

Yep, Ms. Cat, the bottle is already half empty... fp.gif

[Terry Angus]

i wouldn't want to have a go at the author of something that's pretty thoughtful and intelligent, to be fair, but at the end of the day the key words/expressions to me in this are "guess", "reckon", "about" and their equivalents. stuff like this is no different to transfer rumours: it's fun to write, it's fun to read, a small part of it is based in fact and/or will turn out to be right from time to time... but it's mostly conjecture.

[MJG]

I read it and re-read it and to be honest I think he's a little off target.
This summer is like no other we have really had. Senior players have left and are leaving, but we all know deep down the squad needed to change at least age wise.
The finances are as good as they can be for a club our size and we will spend whats required and no more. If we get £20M in for D&D then I would expect us to spend 10-15 of it.

Point 9 about Hughes is wrong, it had nothing to do with ambition of Fulham, fact is Hughes is a dick and possibly a coward. Work needed doing on the squad and he was not up for it.

[The Bronsons]

Nice piece, which confirms that MAF spends when he has to: that's why Sanchez got extra funds, and Hodgson. Our target under MAF for years has been to stay in the league. Jol said as much when he took over. The trick is to do that while changing the way we recruit so that we bring through more of the younger (cheaper) players who we can sell on. One marquee signing a year is probably about right, and I'm sure we'll see one this year - probably a striker.

[VicHalomsLovechild]

If he's right and we're paying our way. Then that has to be a bonus. Particulary at this moment in time. I wonder how many clubs are not in a sound state moneywise at the moment?

[mr-ska]

We are Not Skint.. there is no need to worry....  Now... i think i'll have some Weetabix..x

[cottage cheese]

im sorry but we are NOT skint. Yes we have high debts but MAF took them out on himself and not the actual club. We do things the proper way which keeps this club ticking over. I mean look ast west ham...their wage bill is ridiculous and paying the price for it now by trying to flog most of their players for half their value. We are sensible and I hope we stay this way.

im not bothered if we dont have 30 million to spend. All we really need is a left back and midfielder and maybe a striker with one coming in on loan?  If we can either keep dempsey or dembele we are sorted

[Edwatch_Winston_Malone]

None of this matters as apparently the world ends in December...

[zzamora]

http://cravencottagenewsround.wordpress.com/2012/07/03/fulham-finances/


So, what is there to say about the finances of 'Fulham Football Leisure Ltd'?  Here are ten observations.

1.    Chairman Mo has been wonderfully generous – but not recently.  His last big cash injection was in 2007-08, the season of the Great Escape. He put in over £20m that year, mostly to fund Sanchez's summer spree in the transfer market – Kamara, Davis, Konchesky, Baird, and others.  Hodgson spent some more when he arrived in the January, on Hangeland and (Eddie) Johnson.  The fees weren't disclosed, but it looks to me as though they cost about £3m in total.

Err this isn't true. How about summer 2008, where we easily spent over 20 million? That was hardly off the back of money from the great escape was it? Al-Fayed also injects cash in different ways- see the youth academy, the new stand etc.



2.    Since then, outgoings have more or less been matched by income.  And that's despite at least one relatively costly signing in each season: (Andy) Johnson in 2008-9 (the 7th place finish); Duff in 2009-10 (Hamburg); Dembele in 2010-11 (the Hughes year); and Ruiz in 2011-12.  A self-sufficient football club – now there's something you don't see every day!



3.    The Europa League has been good to us.  Sure, it doesn't bring the kind of riches you get in the Champions' League.  But we did make £12.5m out of the run to Hamburg, and I reckon we would have made £8-9m this season, despite going out at the group stage.  That's because the bulk of the TV revenue is awarded just for getting to the group stage – and the lion's share of it goes to clubs from countries with large TV markets, like England.  So that's £20m over the past three seasons.  To put that in context, it's roughly the amount we paid to buy Duff, Dembele and Ruiz.  Without the Europa League, would we have those players?

4.    But most of the money comes from the Premier League.  About half of it, in fact, just for taking part.  Then roughly another quarter comes from gate receipts – mostly league games, of course – and the Sky/ESPN/BBC deals.

5.    Our players earn about 40 grand a week.  That's my best guess, anyway.  We know that about two-thirds of the club's income goes on pay – for everyone at the club, not just the players.  Invoking the old 80/20 rule, for want of anything better, would suggest that the playing squad is collectively paid about £40m.  That's for about 60 players (!) and again, I'd guess that 80pc of it goes to the 20-odd leading players. In which case, they're getting about £40,000 a week, on average.  That ties in which press reports I've seen regarding the wages of Duff and Zamora, before he left.  Just remember – the average at big clubs is probably at least twice that.

An interesting view of the wages, as clearly the majority of our players earn 40k a week  085.gif In the current squad I daresay that Schwarzer, Hangeland, Riise, Duff, Ruiz and possible Petric are on 40k base wage. The others will be on lower but with more performance based deals- this is how Fulham have always done contracts, we all know that. I even reckon that Petric's contract will heavily rely on goals/performances.

6.    Jol has probably balanced the books in his first year.  Ruiz and others cost about £15m, and Zamora, Greening and Dikgacoi brought in about half that, leaving a shortfall that was covered by the Europa League proceeds.  But they won't recur in this coming season, so...

Seeing as all but two of our outgoings were free transfers, I doubt this is true. Greenings transfer was confirmed at 500k, I daresay Dikgacoi was around that too, and Zamora was 5 million. A conservative estimate that they saved around half the total transfers, which were more like 16-17 when you add extra fees.

7.    ...Jol might have to bring in £5m more than he spends in the transfer market this year (i.e. the summer window plus the January window).  That's what I think it would take to keep cash inflow in line with cash outflow.  Of course, MAF may decide that he's willing to cover a net cash outflow.  Otherwise, a plausible scenario is that Jol raises £20m by selling Dembele and Dempsey, and gets to spend £15m of it.

Hello, have you seen the new TV right deal?

8.    Alternatively, he could achieve much the same effect by not replacing the big earners who have been released this summer (Johnson and Murphy).  If they were on 40 grand a week, they'd have getting on for £5m a year between them.  That wouldn't prevent Jol making other new signings – they'd just have to be on packages similar to the other players we've released (Grygera, Riise BH, Sa and the Pog).  It's a fair bet that 31-year old Mladen Petric falls into that category.

9.    All this was probably the scenario that Hughes could see coming a year ago.  So when he talked about "lack of ambition" perhaps that's what he had in mind.

This is one of the worst sentences I have ever seen.  bang head

10.    Change is afoot.  First, there's the Premier League's monster new broadcasting deal with Sky and British Telecom.  Second, there's our proposed stadium expansion.  If there's enough interest, I'll write on another occasion about how these developments might affect Fulham's fortunes – and the money at Jol's disposal.

We are not skint. We will spend when we need to, we have done it before and we will do it again- Al-Fayed backs his managers in the transfer market, we all know that.

This kind of scaremongering is really quite annoying.

[AlFayedsChequebook]

Some people's overreactions to this piece are ridiculous. Get a grip.

The headline is completely incorrect too.

[Senior Supporter]

As soon as I read the first paragraph, where the writer states that he earns his living by analysing the finances of listed companies, and that football clubs are not very different, I found myself saying "yes they are" and doubting that the piece would be very informative.

About a year ago one of the large accountancy firms produced a report on football club finances, and concluded that, unlike businesses in general, financial prudence was a phrase completely foreign to the managements of most clubs!  

[Lighthouse]

They have found the particle that means Higgs Bosun is a mass of confusion. The fact that we are poor or not and may or may not afford more than a 58 year old free transfer is still speculation. So the article while interesting, just leaves me confused.

[b+w geezer]

Anyone who wants to supplement this article with an overview of how Fulham's position compares with others, should take a look at David Conn here:
http://www.guardian.co.uk/football/2012/may/23/premier-league-accounts-profit-debt

On the wage front, our total bill (most recently £58m) suggests we can compete with half of the prem but not the others.

The author of the Craven Cottage Newsround piece has attracted some scorn for suggesting that around around 20 players earn £2m per annum each, leaving £18m in total for everyone else. It's true that this would be inclusive of national insurance, so the net would be more like 35k per week. If the total wage cost split is more like £35m for the top 20 and £23m for everyone else, then it would be about 30k per week net for the top 20. Or maybe it's something in between. Either way, I don't think scorn is appropriate.

I do suspect he has slightly overestimated that the Europa League factor (at least, I can't reconcile it with http://www.uefa.com/uefa/management/finance/news/newsid=1661184.html ) but by and large I'd have thought he was giving the picture fairly. The new TV deal will bring in lots more money, but that lies in the future and the big question is how much of it will just go straight out again on extra wages. Along with many others, our own bill has practically doubled since the Coleman era. Need it continue to keep doing so, bearing in mind how very much better prem players are already paid than footballers in all but a very few leagues elsewhere?

[White Noise]

Thanks for that. :54:

1.    Chairman Mo has been wonderfully generous – but not recently.  His last big cash injection was in 2007-08, the season of the Great Escape. He put in over £20m that year, mostly to fund Sanchez's summer spree in the transfer market – Kamara, Davis, Konchesky, Baird, and others.  Hodgson spent some more when he arrived in the January, on Hangeland and (Eddie) Johnson.  The fees weren't disclosed, but it looks to me as though they cost about £3m in total.

All the last few seasons accounts have pointed to increased revenues, strong control on wage inflation and a club paying its way. We have been moderately profitable or breaking even and this has led to the introduction in the accounts of an intention to repay MAF a set amount per year of the money owed to him. Sanchez didn't spend anything like as much as it appeared because he got 15 plus players out in one Summer and raised quite a lot as a consequence. I had thought that MAF might have to put his hand in his pocket to fund the £30m Riverside development but future TV revenues may mean that doesn't need to be the case. The club will undoubtedly try and secure advance revenues on this by forward selling corporate facilities.

2.    Since then, outgoings have more or less been matched by income.  And that's despite at least one relatively costly signing in each season: (Andy) Johnson in 2008-9 (the 7th place finish); Duff in 2009-10 (Hamburg); Dembele in 2010-11 (the Hughes year); and Ruiz in 2011-12.  A self-sufficient football club – now there's something you don't see every day!

One of the big changes since Hodgson arrived has been the substantial increase in the stability of the squad. Up until that point, our time in the PL have been characterised by a very high turnover of playing staff with players on average staying about 18 months. It was difficult in Colemans time to find anyone who has been with the club more than 2 years but we currently have a number of players who have been with us 4 or 5 years. This has led to a smaller number of players being purchased each season and less money being spent as a consequence on signing on fees, agents fees and transfer fees. Continuity is the key to financial as well playing stability.

3.    The Europa League has been good to us.  Sure, it doesn't bring the kind of riches you get in the Champions' League.  But we did make £12.5m out of the run to Hamburg, and I reckon we would have made £8-9m this season, despite going out at the group stage.  That's because the bulk of the TV revenue is awarded just for getting to the group stage – and the lion's share of it goes to clubs from countries with large TV markets, like England.  So that's £20m over the past three seasons.  To put that in context, it's roughly the amount we paid to buy Duff, Dembele and Ruiz.  Without the Europa League, would we have those players?

The club recognise that regular European football is a desirable and realistic objective. When Hodgson first got us in there was a sense among fans that it might not happen again for a long time but Jol has stated that one objective is to get us playing regularly in Europe - he just wants breathing space to get the squad structured correctly first.

4.    But most of the money comes from the Premier League.  About half of it, in fact, just for taking part.  Then roughly another quarter comes from gate receipts – mostly league games, of course – and the Sky/ESPN/BBC deals.

Broadcasting revenues continue to go through the roof and the new domestic deal will give Fulham around an extra £30 million a season from 2013/14 - a big leap for a club turning over in the £70 millions. The next round of overseas rights deals are due as well and this will undoubtedly throw another big increase into the pot. David Sullivan, the West Ham co-owner, said that he senses there is a new mood abroad amongst clubs in the PL to start pushing back against increased wage demands and to try and ensure that the new broadcasting monies don't go straight to players and agents. I think clubs outside the top 6 are starting to realise that it is pointless to try and compete on wages with anyone other than the clubs around them. Man Utd turnover £330m and Fulham about £70m with very different wage bills but Fulham are able to give them a game of football that is closer in quality than the monetary gap suggests. Would spending twice as much money enable Fulham to close that gap by much - probably not. So its better to husband your resources more carefully and focus on long term survival in the top flight.

5.    Our players earn about 40 grand a week.  That's my best guess, anyway.  We know that about two-thirds of the club's income goes on pay – for everyone at the club, not just the players.  Invoking the old 80/20 rule, for want of anything better, would suggest that the playing squad is collectively paid about £40m.  That's for about 60 players (!) and again, I'd guess that 80pc of it goes to the 20-odd leading players. In which case, they're getting about £40,000 a week, on average.  That ties in which press reports I've seen regarding the wages of Duff and Zamora, before he left.  Just remember – the average at big clubs is probably at least twice that.

The overall wage bill accounts for something like 700--800 staff so I don't think quite as much as £40 million goes to players. When AJ arrived he was supposed to be our top earner on £45k a week. A couple of journo's have said Schwarzer is currently our top earner on £40k a week. I seem to recall people saying Dembele had come in on around £25k a week. Outside of the top 6 or 7 clubs I think it is only a handful of players at each club that are earning around the £40k-£50k mark a week - unless you hand your club, as Villa did, to Martin O'Neill and even average players start getting that sort of money. Since we are talking best guesses mine would be as follows -

£40k plus a week -

Mark Schwarzer
Brede Hangeland
Clint Dempsey
Bryan Ruiz
Mladen Petric

£35k plus a week -

Mahamadou Diarra
Aaron Hughes
Damien Duff
Philippe Senderos
John Arne Riise
Steve Sidwell

£30k plus a week -

Dickson Etuhu
Zdenek Grygera
Simon Davies
Mousa Dembele

£25k plus a week -

Chris Baird
David Stockdale

£20k plus a week -

Marcel Gecov
Pajtim Kasami
Stephen Kelly

£15k plus a week -

Bjorn Helge Riise
Matthew Briggs
Rafik Halliche
Kerim Frei

£10k plus a week -

Neil Etheridge
Csaba Somogyi
Alex Kacaniklic

Less than £10k a week -

6.   Jol has probably balanced the books in his first year.  Ruiz and others cost about £15m, and Zamora, Greening and Dikgacoi brought in about half that, leaving a shortfall that was covered by the Europa League proceeds.  But they won't recur in this coming season, so...

Chris Smalling was sold two summers ago for something like £8 million rising to £12.5 million. Transfer money is often paid in tranches. Jol did not have much time to do his work & clearly is not a man to be held to ransom over players and the prices they command. He has been managing our expectations through the press pretty much since arrival by saying variously that he has to get the average age down substantially, that he is sanguine about the fact that players come and players go and that part of his job is to keep the team evolving and to replace players when the club decide it is worth selling. When you look at the average net transfer spend of PL clubs over the last 5 years or so a lot are breaking even or only spending £5-£7m a season net.

7.    ...Jol might have to bring in £5m more than he spends in the transfer market this year (i.e. the summer window plus the January window).  That's what I think it would take to keep cash inflow in line with cash outflow.  Of course, MAF may decide that he's willing to cover a net cash outflow.  Otherwise, a plausible scenario is that Jol raises £20m by selling Dembele and Dempsey, and gets to spend £15m of it.

If Dempsey & Dembele were to stay I'm not sure Jol has to spend much on the team. As it is I think Dempsey will be gone by end of July and Jol will probably achieve net spending of about £5m this summer when the proceeds of that sale and others are taken into account. Brian Talbot said a few months ago that there would be lots of player turnover this summer and I don't think we have seen the half of it yet. I think MAF would fund any cashflow shortfall because future revenues mean he is likely to get his money back quite quickly.

8.    Alternatively, he could achieve much the same effect by not replacing the big earners who have been released this summer (Johnson and Murphy).  If they were on 40 grand a week, they'd have getting on for £5m a year between them.  That wouldn't prevent Jol making other new signings – they'd just have to be on packages similar to the other players we've released (Grygera, Riise BH, Sa and the Pog).  It's a fair bet that 31-year old Mladen Petric falls into that category.

Last season Jol seemed very frustrated at the inability of our squad to play as he wanted and a large part of our 25 man squad almost never played. That is just dead money. I think he will get rid of the non-playing ones, as far as he is able, and replace most of them by promoting youngsters, who will bring the average salary down as well as the age.

9.    All this was probably the scenario that Hughes could see coming a year ago.  So when he talked about "lack of ambition" perhaps that's what he had in mind.

I think the largest part of Hughes frustration was with the speed of action at Fulham. I think he is used to being able to turn deals round quite quickly and secure his target players early in each window. Fulham seem to be very cautious about they way in which they approach acquiring players and extending contracts. There were a couple of high profile signings that Hughes was apparently concerned that we didn't go after more aggressively and he expressed his concern at how many contract discussions were still outstanding for existing players when he first arrived. I get the impression that Fulham miss out on some targets because they are quite risk averse when it comes to signing players - not abd thing on some levels.

10.    Change is afoot.  First, there's the Premier League's monster new broadcasting deal with Sky and British Telecom.  Second, there's our proposed stadium expansion.  If there's enough interest, I'll write on another occasion about how these developments might affect Fulham's fortunes – and the money at Jol's disposal.

Revenues are only going one way and clubs are at last to start to invest more in training grounds, stadium facilities, capacity, youth development and other long term projects. The new Riverside will give Fulham's revenue a shot in the arm but overall people turning up at Craven Cottage will matter, in monetary terms at least, less and less. The IPO document released yesterday by Manchester United shows how quickly they have grown their different revenue streams in recent years and just how big a gap there is between the middle and the top clubs -

http://www.sec.gov/Archives/edgar/data/1549107/000104746912007026/a2210109zf-1.htm

[NorthernWhite]

On our last filing at companies house for accounts ending June '11, our salaries totalled £ 50,329,000 with an additional £ 822,000 for Directors. Where did you get the figures of £ 58 million from B & W?