Fulham’s Financial Results

[Friendsoffulham]

Fulham's financial results for 2016/17 cover their third consecutive season in the Championship following relegation from the Premier League. Under manager Slaviša Jokanović, they finished 6th before losing to Reading in the play-off semi-final. Some thoughts follow:

FFC's loss almost doubled from £12.5m to £21.3m, as they strived for a return to the Premier League, even though profit on player sales was up £10m to £17m. Main drivers were a £9m increase in player amortisation & write-off of £7m costs of a previous stadium development plan.



FFC's revenue dropped £1m (3%) to £35m, mainly due to a £4m reduction in the Premier League parachute payment, which decreased broadcasting income to £21m. Player loans were also down £1m, but commercial revenue rose £2.6m to £7.3m and gate receipts were up £1.0m to £6.6m.



FFC's wage bill was up £1.0m (3%) to £37.1m, while other expenses climbed £0.8m (8%) to £12.0m. The loss on disposal of property assets was £0.5m higher, but net interest payable was £0.2m lower.

FFC's £21m loss was 3rd highest in the Championship in 2016/17, only below BHAFC £39m (including £9m promotion bonuses) & WWFC £23m. In general, almost all clubs in this division lose money. Exceptions are normally due to once-off items (high player sales, loan write-offs, etc).



FFC's profit on player sales was up from £7m to £17m, the 2nd highest in the Championship, only behind Aston Villa £27m. Fulham did not detail which players were included in 2016/17, but the largest likely to be Ross McCormack to Villa & Konstantinos Mitroglou to Benfica.



Losses are nothing new for FFC, as the last time they made a profit was in 2011. In fact, they have only reported profits twice in the last 20 years. Losses have accelerated since Shahid Khan bought the club in July 2013, amounting to £94m in the last 4 years.



FFC's two (small) profits in 2008 & 2011 were largely due to profits on player sales (£12m & £14m respectively). Without £17m from player sales in 16/17 loss would have been £30m. To be fair, Fulham's bottom line has also been adversely impacted by impairment: £54m in last decade.



FFC's EBITDA (Earnings Before Interest, Depreciation and Amortisation), which strips out player sales and non-cash items to give underlying profitability, has declined from a £6m peak in the Premier League in 2010 to minus £14m in 2017.



Only 4 Championship clubs to date have positive EBITDA, but FFC minus £14m is in the bottom half of the division, around the same level as Birmingham City, Sheffield Wednesday, Aston Villa, Derby County and Wolves.



If FFC are promoted, finances would improve significantly in the Premier League. Each club promoted to top flight in 15/16 (Burnley, Hull & Boro) converted losses to profits (average £19m loss to £23m profit). Helps explain owners' willingness to fund losses in Championship.



FFC's revenue has declined by £56m (62%) from £91m to £35m since relegation in 2014. Most of this decrease is broadcasting £46m, but gate receipts £6m and commercial £5m are also down. Revenue will fall further in 2018/19 (unless promoted), as parachute payments end in 2017/18.



FFC's £35m revenue was 6th highest  in Championship in 16/17 (after considering Newcastle, yet to publish accounts), exactly in line with their league position. Highest revenues to date are Norwich £75m & Villa £74m. Top club not benefiting from parachute payments was Leeds £34m.



Championship revenue is greatly influenced by those Premier League parachute payments, e.g. £41m to Aston Villa, Newcastle & Norwich (up from £26m in 15/16 thanks to new PL TV deal). FFC will receive another £16m in 2017/18, but they will then stop in 2018/19.



FFC's TV income of £21m, was significantly higher than the £7m most Championship clubs without parachute payments receive. If promoted, Fulham would get £94m in top flight even if they finish last. Added to £72m parachute payments means promotion is worth at least £166m.



FFC's match day revenue rose by 17% (£1.0m) to £6.6m, as average attendance was up 9% from 17,566 to 19,199 and there were 3 more home games. Revenue was in the top half of the division, partly thanks to relatively high (London) ticket prices. Around 60% of Villa & Brighton £11m.



FFC's attendances steeply declined from around 25,000 in the Premier League to 17,600 in 2015/16, but rebounded a little last season to 19,200. Club will hold 2018/19 season ticket prices at same level even if promoted.



FFC's 19,199 attendance was only 12th highest in Championship last season, a long way behind top two (Newcastle 51,106 & Villa 32,107). Club has planning permission to expand Riverside Stand at Craven Cottage, increasing capacity from 25,700 to 29,600, at cost of £80-100m.



Last week chairman Shahid Khan bid to purchase Wembley Stadium from the Football Association in order to protect the position of his NFL team, Jacksonville Jaguars, in London. However, he has stated that this will have no impact on Craven Cottage as the home of FFC.

FFC's commercial income rose 55% (£2.6m) from £4.7m to £7.3m, though this included £1.3m unexplained compensation. This is still less than half of Leeds United £16m and Norwich City £15m.



FFC's shirt sponsor from 2017/18 is Grosvenor Casinos in a two-year deal, while KONAMI is the back of shirt partner. The kit deal with Adidas has been extended until 2023.

FFC's wages almost halved following relegation, falling 46% (£31m) from £68m to £37m, but has remained at this level, as the club decided to retain a high wage bill to attract players in a bid to return to the top flight with wages to turnover up from 75% to 106% in this period.



In fact, FFC's £37m wage bill is 3rd highest in Championship of clubs that have reported to date, but a long way behind Aston Villa £61m and Norwich City £55m (and probably NUFC when they publish accounts). For context, it was more than promoted clubs BHAFC £31m & HTAFC £22m.



FFC's determination to be in the promotion mix is highlighted by the fact that their 2016/17 £37m wage bill is the 10th highest ever in the Championship, just ahead of their 11th placed £37m in 2014/15. That said, it is only around half of QPR's record-breaking £75m in 2013/14.



FFC's wages to turnover ratio of 106% might sound terrible, but is actually only the 10th highest (worst) in the Championship, as over half the clubs in that division have ratios above 100%. It's well below Blackburn 147%, HTAFC 138% (impacted by promotion bonuses) & NFFC 137%.



Following significant investment in the summer of 2016, FFC player amortisation more than doubled from £6m to £14m, close to their £18m peak in the Premier League. They also booked £1.5m player impairment in 2016/17.



After the increase, FFC player amortisation of £14m is the 3rd highest in the  Championship to date, only behind clubs relegated from the Premier League the preceding season, i.e. Aston Villa £24m and Norwich City £17m.



As FFC frequently book player impairment charges, it is worth understanding the accounting. Basically, this reduces the value of a player in the books to an amount based on directors' assessment of achievable sales value. Effect is to reduce future player amortisation charges.



FFC spent £24m on players in 16/17, the 3rd highest in Championship and the same as Fulham's last season in the Premier League, though they were significantly outspent by Aston Villa £88m and Wolves £32m. Signings included Sigurdsson, Kebano, Sanchez, Johansen, Button & Ayite'



On a cash basis, net spend has significantly increased under Shahid Khan, rising from average of £3m in 4 years from 2010 to 2013 to £13m in last 4 years. 2017/18 saw arrivals of Fonté, Kamara, Christie & Cissé, but this was largely offset by sales of Aluko, Malone & Sanchez.



FFC's gross debt rose from £37m to £66m, all owed to Shahid Khan. Would have been much higher without former owner Mohamed Al Fayed converting £212m of debt into equity in 2012. Khan has done similar, converting £58m in 2015-16 plus a further £71m after these accounts closed.



FFC's debt of £66m is by no means the largest in Championship, e.g. highest reported to date are Brighton £207m (new stadium & training ground), Cardiff City £127m & Blackburn £107m. Worth noting that holding company owes £153m, though debt again capitalised after accounts closed.



Although debt is high in the Championship, most of it is provided by owners who charge little or no interest, i.e. Khan's loans are unsecured, interest-free and have no fixed repayment date.



Owner Shahid Khan provided FFC with a £29m loan in 2016/17, which was used to cover £13m loss from operating activities. The club then spent £6m (net) on new players and invested £12m in infrastructure, including acquisition of the former BBC sports ground at Motspur Park.



Looking at FFC's holding company, Khan has put in nearly a quarter of a billion (£243m), split into £44m for shares and £199m of loans. Little wonder that Finance Director Sean O'Loughlin said club's intention was to become less reliant on the chairman's "generous benefaction".

This has been the story at FFC for many years. In the last decade, virtually all of the club's £181m available cash has come from the owners with around half used for player purchases (net) £97m, infrastructure £40m, loan/interest payments £24m and covering losses £18m.



FFC are compliant with FFP after allowable exclusions for academy, community & infrastructure (estimated at £7m a year). FFP allows maximum £39m loss over 3-year period (current season plus previous two seasons). In the past had transfer embargo after breaching limit in 2014/15.



FFC's finances would be transformed by promotion to the Premier League, but the danger is that if they fail to get there, they would almost certainly have to cut their cloth to meet FFP, including the possibility of selling major talents like Ryan Sessegnon and Tom Cairney.

[Milo]

Accountants etc of the FoF world please help us with this.

Looking briefly at the ups and downs column this year. It looks like we broke roughly even on player sales/purchases but lost the majority of our money on stadium upgrade plan costs and reduced parachute payments? Is that fair to say or...?

[love4ffc]

Couple of questions
1. In Layman's terms, are we still a healthy club financially?   

2.  Do I understand correctly that God forbid we don't go up, it looks, or sounds like it will become even harder for promotion due to the FFP crap?   

[MJG]

Really helpful analysis, although I'd like to know where he gets the yearly net transfer spending figures from. He says "source: cash flow statement" but yearly transfer spending isn't in there, or anywhere in the statutory accounts as far as I'm aware. The figures he gives are totally different to the Transfermarkt figures.

Transfermarkt is not reliable on figures. They are created partly by what is read in press and also by contributions from readers.
Swiss Ramble who produces a lot of these for clubs is very reliable and uses the same framework for his reports from company accounts.

[MJG]

Really helpful analysis, although I'd like to know where he gets the yearly net transfer spending figures from. He says "source: cash flow statement" but yearly transfer spending isn't in there, or anywhere in the statutory accounts as far as I'm aware. The figures he gives are totally different to the Transfermarkt figures.

Transfermarkt is not reliable on figures. They are created partly by what is read in press and also by contributions from readers.
Swiss Ramble who produces a lot of these for clubs is very reliable and uses the same framework for his reports from company accounts.

Agree with all that, even Transfermarkt I take with a pinch of salt. And the Swiss ramble stuff, I know you've referred to it before on here and I think it's excellent. But on the specific issue of transfer spending, you cannot see that in our accounts, all you can see is amortisation across the squad, so not sure where he gets that from

well in accounts it does mention transfer assets and player disposals etc. Must take it from that. Because he uses same calculations for all teams even if slightly out then compared to others it's at least a comparison as all using same rules to work out.

[mrmicawbers]

Looks like our Chairman is doing as much as he's allowed under FFP. We need to get promoted this year or something will have to give unless we go all out and break FFP.

[Fulham76]

Couple of questions
1. In Layman's terms, are we still a healthy club financially?   

2.  Do I understand correctly that God forbid we don't go up, it looks, or sounds like it will become even harder for promotion due to the FFP crap?   

They're a horrendous set of financials, no doubt about it, and getting worse.

We probably are a healthy club finanically but purely down to the support of our owner, without him we wouldnt last 2 years trading like that.

[F(f)CUK]

Couple of questions
1. In Layman's terms, are we still a healthy club financially?   

2.  Do I understand correctly that God forbid we don't go up, it looks, or sounds like it will become even harder for promotion due to the FFP crap?   

They're a horrendous set of financials, no doubt about it, and getting worse.

We probably are a healthy club finanically but purely down to the support of our owner, without him we wouldnt last 2 years trading like that.

In the old days, our accounts were probably similarly bad but all the money was owed to Al Fayed.  Of course, now we have FFP we are not allowed for this to be extensive.  We have to go up this year, otherwise we are just another mid to lower cash available club for the division.

[Fulham76]

Couple of questions
1. In Layman's terms, are we still a healthy club financially?   

2.  Do I understand correctly that God forbid we don't go up, it looks, or sounds like it will become even harder for promotion due to the FFP crap?   

They're a horrendous set of financials, no doubt about it, and getting worse.

We probably are a healthy club finanically but purely down to the support of our owner, without him we wouldnt last 2 years trading like that.

But it's all relative isn't it.

Do we look like a profitable business? No.

Do we look worse than many other top half championship clubs? No.

I haven't looked at any other clubs financials but someone asked the question if we're a healthy club financially? The answer is absolutely not, if you take away Khan.

Although, we've been in the same position for most of the last 20 years.

[Fulham1959]

Pretty comprehensive set of figures and charts.  Thanks.

[BedsFFC]

We've known for a while that not going up is going to make life tough.

We will have to cut our cloth accordingly but at what stage is this looked at?

What I mean is, if we fall foul of the financial threshold (I believe £39m loss over 3 years) when will we fall foul? This summer, start of the season, January 2019?

And what can happen to us at that point?

Hope that makes sense? I suppose what I'm really thinking is, do we still have the option of just going for it next season?

[MJG]

We've known for a while that not going up is going to make life tough.

We will have to cut our cloth accordingly but at what stage is this looked at?

What I mean is, if we fall foul of the financial threshold (I believe £39m loss over 3 years) when will we fall foul? This summer, start of the season, January 2019?

And what can happen to us at that point?

Hope that makes sense? I suppose what I'm really thinking is, do we still have the option of just going for it next season?

not with at least two players we currently have. Would need to sell TC and Sess at top price and see where that leaves us. I'd expect to cash in on a couple more. Then as long as we can satisfy the league we are within the 39m loss for three seasons we would be ok.

[BedsFFC]

We've known for a while that not going up is going to make life tough.

We will have to cut our cloth accordingly but at what stage is this looked at?

What I mean is, if we fall foul of the financial threshold (I believe £39m loss over 3 years) when will we fall foul? This summer, start of the season, January 2019?

And what can happen to us at that point?

Hope that makes sense? I suppose what I'm really thinking is, do we still have the option of just going for it next season?

not with at least two players we currently have. Would need to sell TC and Sess at top price and see where that leaves us. I'd expect to cash in on a couple more. Then as long as we can satisfy the league we are within the 39m loss for three seasons we would be ok.

Blimey.

Thanks

[MJG]

We've known for a while that not going up is going to make life tough.

We will have to cut our cloth accordingly but at what stage is this looked at?

What I mean is, if we fall foul of the financial threshold (I believe £39m loss over 3 years) when will we fall foul? This summer, start of the season, January 2019?

And what can happen to us at that point?

Hope that makes sense? I suppose what I'm really thinking is, do we still have the option of just going for it next season?

not with at least two players we currently have. Would need to sell TC and Sess at top price and see where that leaves us. I'd expect to cash in on a couple more. Then as long as we can satisfy the league we are within the 39m loss for three seasons we would be ok.

Blimey.

Thanks

That seems very pessimistic.

Swiss ramble has us making a £14m loss (if you look at EBITDA or the headline losses less stadium development) which is around the £13m/year permitted by FFP.

That's with a net transfer spend of £6-8m each year (according to him - although i'd Query that) and with it being 16/17 data, id guess our gate receipts are up another £1m this year.

So the only gap I can see us needing to make up is the parachute payments when they end, at what, £20m? That would be covered by just selling Cairney. If we sold Fonte or Sessegnon we'd have money to splurge as far as I can see.

pretty much without a ball being kicked we are losing 10m a year, add the fact we have no parachute next year that gets to around the 20m straight away without selling anyone.
Yes selling TC might reduce that, but i think you need to look at the money raised next year almost being enough to cover us for two years. Believe me if we don't go up expect a lot of changes, worse than I've mentioned. Look how far ahead we are in wages to teams without parachute payments. Need to cut wages in half at best.
Pessimistic yes, but also realistic I believe.

[MJG]

pretty much without a ball being kicked we are losing 10m a year, add the fact we have no parachute next year that gets to around the 20m straight away without selling anyone.

£20m... to me that is fine.

£13m permitted to be underwritten by the chairman, £7m from selling Fonte.

Wouldn't even need to sell TC or Sess!

we would though. Dreaming if you expect that kind of thing to happen.

[mrmicawbers]

The Chairman's already putting in the 13 million.We need to find 20 million to cover the lost Parachute Payments.The main thing we would need to do is keep the Manager should we fail this year.We may then have a chance of keeping most of this team together.ît would be useful to find out what the outcome of the QPR FFP Debacle.

[MJG]

The Chairman's already putting in the 13 million.We need to find 20 million to cover the lost Parachute Payments.The main thing we would need to do is keep the Manager should we fail this year.We may then have a chance of keeping most of this team together.ît would be useful to find out what the outcome of the QPR FFP Debacle.

No the Swiss ramble figures (and our accounts) do not include £13m from the chairman anywhere

you mean apart from where it says he put in 29m loan to keep things running?

[Roberty]

The Chairman's already putting in the 13 million.We need to find 20 million to cover the lost Parachute Payments.The main thing we would need to do is keep the Manager should we fail this year.We may then have a chance of keeping most of this team together.ît would be useful to find out what the outcome of the QPR FFP Debacle.

No the Swiss ramble figures (and our accounts) do not include £13m from the chairman anywhere

you mean apart from where it says he put in 29m loan to keep things running?

The headline loss (£21.3m) EBITDA (-£14m) etc do not include a chairman's contribution do they

And you know full well that's what I meant

Tried to have a sensible discussion on this thread, clearly you have some axe to grind but I cannot work out why, so just forget it

I think he means that there is no tooth fairy - the amount of the loss is the owners contribution

The regime does not allow the owner to contribute twice

[Dougie]

One thing not yet mentioned in this discussion is the cost of running a class one football academy, which is included in that £-14m loss and doesn't count towards FFP calculations. I read somewhere (can't remember where) that Derby's costs something like £5m/year to run, so even if ours is £3-4m that suggests we might have more wiggle room within FFP than it initially seems, though we still need more than a Fonte sale to cover that hole next year.

Also presumably within the astronomical £37m we spent on wages last year is the absurd £4m+ Scotty Parker salary we were paying out (unless the "contract extension" he signed in May '16 reduced his wages to something sane).