Author Topic: FFP - Has the Reed, Knockaert and Cav signings  (Read 2225 times)

absenteeism

  • Guest
FFP - Has the Reed, Knockaert and Cav signings
« on: August 29, 2020, 02:11:23 PM »
Has the 3 big money signings of those mentioned in the title put a block on what we can spend this summer?

I am not too sure how FFP works.

If we offer 10 million for Cash but Forest want 12, then what is stopping us?

Offline filham

  • Moritz Volz
  • ***
  • Posts: 17215
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #1 on: August 29, 2020, 02:33:33 PM »
I imagine a lot of our transfer budget is locked up in Seri and Anguissa, time a decision was made on those two.

Offline davew

  • Mr Fayed
  • **
  • Posts: 12008
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #2 on: August 29, 2020, 02:47:12 PM »
Has the 3 big money signings of those mentioned in the title put a block on what we can spend this summer?

I am not too sure how FFP works.

If we offer 10 million for Cash but Forest want 12, then what is stopping us?
Didn´t know we had signed Reed, talks still ongoing as far I have seen?


absenteeism

  • Guest
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #3 on: August 29, 2020, 03:19:12 PM »
Has the 3 big money signings of those mentioned in the title put a block on what we can spend this summer?

I am not too sure how FFP works.

If we offer 10 million for Cash but Forest want 12, then what is stopping us?
Didn´t know we had signed Reed, talks still ongoing as far I have seen?
bobby reid, apologies

Offline The Rational Fan

  • cebu
  • *
  • Posts: 4773
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #4 on: August 29, 2020, 03:24:47 PM »
Has the 3 big money signings of those mentioned in the title put a block on what we can spend this summer?

I am not too sure how FFP works.

If we offer 10 million for Cash but Forest want 12, then what is stopping us?

How FFP works is:

If you sell Seri for £2m and buy Cash for £10m on five years then selling Seri costs you £12m this year and buying Cash costs you £2m, then that costs a total of £14m. So buy Cash is cheap but selling Seri expensive.

Alternatively, if you sell Stefjo for £2.5m and buy Cash for £12.5m, then that costs us nothing this season for FFP. It’s bizarre selling Stefjo is enough to buy Cash this season, but that’s the way FFP works. Most people have a preconceived idea how FFP works that is wrong.

Selling Cairney would raise enormous amounts of FFP money, which makes senses as FFP is designed to encourage us to sell players the bigger clubs want (ie Cairney not Seri). We can fight the FFP rules or embrace them. Embracing FFP means giving the big clubs the players they want from us and keeping the deadwood. Under FFP counter intuitively the best policy is to not sell your failures.
« Last Edit: August 29, 2020, 03:32:32 PM by The Rational Fan »

Offline Arthur

  • Silver Fox
  • *
  • Posts: 2284
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #5 on: August 29, 2020, 03:43:35 PM »
How FFP works is:

If you sell Seri for £2m and buy Cash for £10m on five years then selling Seri costs you £12m this year and buying Cash costs you £2m, then that costs a total of £14m. So buy Cash is cheap but selling Seri expensive.


Why does selling Seri for £2M cost us £12M?


Offline junior white

  • Legend
  • ***
  • Posts: 1357
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #6 on: August 29, 2020, 03:46:53 PM »
Were those players not signed in the last football season and there fore count against that FFP year and not the coming seasons?

I know it is a 3 year rolling average but not sure on that part how it fully works, especially as we are now promoted

Offline Deeping_white

  • The Bard/Corked Hat
  • *
  • Posts: 2892
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #7 on: August 29, 2020, 04:44:02 PM »
Were those players not signed in the last football season and there fore count against that FFP year and not the coming seasons?

I know it is a 3 year rolling average but not sure on that part how it fully works, especially as we are now promoted

Slightly more complicated than that as you have to view players as a depreciating asset - I.E you buy someone for £10m and will probably pay the fee over a number of years so you can spread the outgoing cost,  but if you give them a 5 year contract then you write down their value by £2m a year in FFP terms (£2m x 5 years for their initial £10m purchase price), until they either sign a new deal or leave on a free as the logic is that most players values go down as their contract comes closer to its end. There are more nuances in there in terms of wages etc but that’s a simple way of thinking about it

Offline FulhamStu

  • Silver Fox
  • *
  • Posts: 2230
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #8 on: August 29, 2020, 04:45:25 PM »
I would love to know what we really paid for Knock/BDR/Cav. Suspect all loan deals were just topped up to make them perm.  Expect the initial loan fee was quite high.  Don’t quite know how this helps FFP but we were probably close to the limit so why these deals were constructed as they were.  Also think we always intended to make perm.

Probably cost us nearer to £15M towards the end of the season than £30M.
If we sold all 3 now, suspect we would get £20M so made sense to make perm.

They seem to have all integrated really well into the squad, be interesting to see what minutes they get.  We will need a squad of 24 so expect there is a place for them this season at Fulham.


Offline WolverineFFC

  • Graham Leggat
  • **
  • Posts: 724
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #9 on: August 29, 2020, 05:31:19 PM »
Quote from: Arthur link=topic=77169.msg1158752#msg11587_52 date=1598712215
How FFP works is:

If you sell Seri for £2m and buy Cash for £10m on five years then selling Seri costs you £12m this year and buying Cash costs you £2m, then that costs a total of £14m. So buy Cash is cheap but selling Seri expensive.


Why does selling Seri for £2M cost us £12M?

Depreciated value.

Not sure math will be correct but.

2018 purchase price is 20 million.

He signs a 5 yr contract which will cause his book to go down 4 million a yr.

After 2 yrs he is worth 12 million book value. So if he is sold for 2 million we would have a 10 million net loss for 2020.

Offline davew

  • Mr Fayed
  • **
  • Posts: 12008
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #10 on: August 29, 2020, 06:01:08 PM »
Has the 3 big money signings of those mentioned in the title put a block on what we can spend this summer?

I am not too sure how FFP works.

If we offer 10 million for Cash but Forest want 12, then what is stopping us?
Didn´t know we had signed Reed, talks still ongoing as far I have seen?
bobby reid, apologies
I thought that was what you meant!

Offline davew

  • Mr Fayed
  • **
  • Posts: 12008
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #11 on: August 29, 2020, 06:03:13 PM »
I would love to know what we really paid for Knock/BDR/Cav. Suspect all loan deals were just topped up to make them perm.  Expect the initial loan fee was quite high.  Don’t quite know how this helps FFP but we were probably close to the limit so why these deals were constructed as they were.  Also think we always intended to make perm.

Probably cost us nearer to £15M towards the end of the season than £30M.
If we sold all 3 now, suspect we would get £20M so made sense to make perm.

They seem to have all integrated really well into the squad, be interesting to see what minutes they get.  We will need a squad of 24 so expect there is a place for them this season at Fulham.
Integrated into the squad, agreed but no real competition for them, but PL standard, no way, we need to start making some serious signings or a repeat of 2018/19 on the cards!


Offline Craven_Chris

  • tjl
  • *
  • Posts: 145
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #12 on: August 29, 2020, 09:03:01 PM »
Has the 3 big money signings of those mentioned in the title put a block on what we can spend this summer?

I am not too sure how FFP works.

If we offer 10 million for Cash but Forest want 12, then what is stopping us?

I don't think Fulham would be constrained by FFP right now because the position against FFP limits are measured at the end of each clubs Financial reporting period which for Fulham is usually end June (although they might have delayed it to the end of the season this year due to Covid). The point being we should now be, for FFP purposes, in the 20/21 season period.

This is good for 2 reasons, firstly, we are going to get a lot of premier league central award money against which we can offset any expenditure on transfers right now...

Secondly, the next FFP assessment will take place at the close of the 20/21 season, this means that the 17/18 season will have dropped out of our FFP rolling 3 year assessment period. This is great because Fulham took a bit of a financial battering that season (huge spend on promotion bonuses) and went about £20m over FFP limit for that Season. I believe it has been a bit of a struggle to stay FFP compliant since. With this millstone removed from around our neck, we should have a lot more spending capacity this summer!

Also as others have said, the cost of Cash would be amortised over the length of his contract so the difference between 12 and 10 million for FFP should be pretty small.

But on the same note, it is important to remember that all of the players who Fulham bought for £120m last time we got promoted are still Fulham players (Seri, Anguissa, Bryan, Mitro, Mawson, Farbri, MLM) although some have gone on loan. That means those transfer fees are still amortising against our FFP limits, probably hitting our annual FPP limits by £20m-£30m a season depending on their contract lengths. Given we are only allowed to lose £35m a season that is a big deal!


Offline Arthur

  • Silver Fox
  • *
  • Posts: 2284
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #13 on: August 29, 2020, 09:17:21 PM »
Quote from: Arthur link=topic=77169.msg1158752#msg11587_52 date=1598712215
How FFP works is:

If you sell Seri for £2m and buy Cash for £10m on five years then selling Seri costs you £12m this year and buying Cash costs you £2m, then that costs a total of £14m. So buy Cash is cheap but selling Seri expensive.


Why does selling Seri for £2M cost us £12M?

Depreciated value.

Not sure math will be correct but.

2018 purchase price is 20 million.

He signs a 5 yr contract which will cause his book to go down 4 million a yr.

After 2 yrs he is worth 12 million book value. So if he is sold for 2 million we would have a 10 million net loss for 2020.

Thank you for your helpful reply.

Since my previous post, I have done a little research and discovered that, owing to the disruption caused by the pandemic, 'the current 2020 financial year will not be assessed at all under FFP procedures, and will instead be rolled up into 2021, and the two years assessed together as a single financial period.'

https://www.theguardian.com/football/2020/jun/18/uefa-agree-to-suspend-financial-fair-play-rules-due-to-pandemic

With this in mind, regarding to the sale of Seri, who is into the third year of a four-year contract, it seems to me it can be no more 'expensive' were we to sell him this transfer window than any future one because the loss would not be recorded until 2022 by which time, if he were still with us, his entire transfer fee would have amortised anyhow.

Statto

  • Guest
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #14 on: August 29, 2020, 09:21:52 PM »
That means those transfer fees are still amortising against our FFP limits, probably hitting our annual FPP limits by £20m-£30m a season depending on their contract lengths. Given we are only allowed to lose £35m a season that is a big deal!



Good post.
Only thing I'd say is that this season, revenue will probably be about £40m+ above expenses before we even start making a loss. So even with the ongoing amortisation of the Seri, Anguissa, Mawson and Mitrovic fees we could still spend a lot, lot more (provided we have an exit strategy in the event of relegation, such as selling players or loaning them out for a fee that'll cover the amortisation)


Offline Craven_Chris

  • tjl
  • *
  • Posts: 145
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #15 on: August 29, 2020, 09:32:12 PM »


Thank you for your helpful reply.

Since my previous post, I have done a little research and discovered that, owing to the disruption caused by the pandemic, 'the current 2020 financial year will not be assessed at all under FFP procedures, and will instead be rolled up into 2021, and the two years assessed together as a single financial period.'

https://www.theguardian.com/football/2020/jun/18/uefa-agree-to-suspend-financial-fair-play-rules-due-to-pandemic

With this in mind, regarding to the sale of Seri, who is into the third year of a four-year contract, it seems to me it can be no more 'expensive' were we to sell him this transfer window than any future one because the loss would not be recorded until 2022 by which time, if he were still with us, his entire transfer fee would have amortised anyhow.

Just to note on that - these are the UEFA FFP rules which don't apply to Fulham (unless we qualify for europe, fingers crossed) - the Premier League FFP rules do not to my knowledge have this suspension of limits. The Premier league has simply said that teams can deduct any covid expenses or lost income from their FFP calculations. At least that is my understanding.

Offline WolverineFFC

  • Graham Leggat
  • **
  • Posts: 724
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #16 on: August 29, 2020, 11:03:29 PM »
That means those transfer fees are still amortising against our FFP limits, probably hitting our annual FPP limits by £20m-£30m a season depending on their contract lengths. Given we are only allowed to lose £35m a season that is a big deal!



Good post.
Only thing I'd say is that this season, revenue will probably be about £40m+ above expenses before we even start making a loss. So even with the ongoing amortisation of the Seri, Anguissa, Mawson and Mitrovic fees we could still spend a lot, lot more (provided we have an exit strategy in the event of relegation, such as selling players or loaning them out for a fee that'll cover the amortisation)

I think selling Ryan Sessegnon was probably one such exit strategy you bring up. He had to generate 15 - 20 million in net profit which combined with the parachute payment may have covered if not all, at least a large portion of last season's amortization sums.

Would be curious how/if the club uses their player contract options to massage the amortization as well. I look at players like Odoi or even TC. The club keep extending their contracts. Odoi was purchased for 1-2 million in 2016. He is going on the 5th year of a 3 yr contract with an option. I suspect one reason the club signed him to a new contract at the end of 2019 instead of just extending it is so they could change his amortization for the previous years. But I don't know if that is true.

Offline Arthur

  • Silver Fox
  • *
  • Posts: 2284
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #17 on: August 29, 2020, 11:05:29 PM »
Craven Chris,

Thank you for correcting my misunderstanding.

Obviously, this changes the impact of any potential sale of Seri. Assuming a transfer fee of £24M spread over four years, his book value would currently stand at £12M. Were we to sell him now for, say, £4M, our gross deficit would be £8M on this season's FFP figure. If we don't sell  Seri, however, his value still depreciates by £6M this season - meaning our net loss on his leaving would be just £2M.

Add in the saving on Seri's salary (certainly an amount greater than my perceived £2M net loss) and it seems to me as if his departure in this transfer window - even at a third of his current book value - would have no additional impact upon the restrictions posed by FFP.
« Last Edit: August 30, 2020, 02:17:07 AM by Arthur »


Offline WolverineFFC

  • Graham Leggat
  • **
  • Posts: 724
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #18 on: August 29, 2020, 11:15:31 PM »
Quote from: Arthur link=topic=77169.msg1158752#msg11587_52 date=1598712215
How FFP works is:

If you sell Seri for £2m and buy Cash for £10m on five years then selling Seri costs you £12m this year and buying Cash costs you £2m, then that costs a total of £14m. So buy Cash is cheap but selling Seri expensive.


Why does selling Seri for £2M cost us £12M?

Depreciated value.

Not sure math will be correct but.

2018 purchase price is 20 million.

He signs a 5 yr contract which will cause his book to go down 4 million a yr.

After 2 yrs he is worth 12 million book value. So if he is sold for 2 million we would have a 10 million net loss for 2020.

Thank you for your helpful reply.

Since my previous post, I have done a little research and discovered that, owing to the disruption caused by the pandemic, 'the current 2020 financial year will not be assessed at all under FFP procedures, and will instead be rolled up into 2021, and the two years assessed together as a single financial period.'

https://www.theguardian.com/football/2020/jun/18/uefa-agree-to-suspend-financial-fair-play-rules-due-to-pandemic

With this in mind, regarding to the sale of Seri, who is into the third year of a four-year contract, it seems to me it can be no more 'expensive' were we to sell him this transfer window than any future one because the loss would not be recorded until 2022 by which time, if he were still with us, his entire transfer fee would have amortised anyhow.

The club likely think of him as a sunk cost by now anyway. They will not recoup profit on him at any point in his sale. It is the club's largest advantage with our owner. Those sort of mistakes don't beget more mistakes because it is an insignificant cost to him. Another owner with less means might need to claw some of that money back for their own livelihood. That weighs a club down in my opinion over time.

If you think of each year as its own entity though, there are advantages in turning a 4 million loss (more when salary is counted if he is sitting in the stands) into 1 or 2 million if you can for 2020. There is no sense in taking a 10 or 12 million loss if you can lessen it and draw it out.

Just saw your post to Craven, there is probably a sweet spot where the club are okay with a larger hit on the loss. It just appears no clubs are either willing to pay Seri enough to convince him to sign a new contact or they are not getting the transfer fee to a point where Fulham are comfortable with the loss.
« Last Edit: August 29, 2020, 11:24:38 PM by WolverineFFC »

Offline Craven_Chris

  • tjl
  • *
  • Posts: 145
Re: FFP - Has the Reed, Knockaert and Cav signings
« Reply #19 on: August 30, 2020, 12:53:21 AM »

Good post.
Only thing I'd say is that this season, revenue will probably be about £40m+ above expenses before we even start making a loss. So even with the ongoing amortisation of the Seri, Anguissa, Mawson and Mitrovic fees we could still spend a lot, lot more (provided we have an exit strategy in the event of relegation, such as selling players or loaning them out for a fee that'll cover the amortisation)

Completely agree, I think Fulham have had two very good FFP years
-19/20 where first year parachute payments and the Sees sale would have offset promotion bonuses, sticky premier league wages and premier league star contract amortisation
- 18/19 which was a premier league central award bonanza

I estimate these two years more or less offset  the more difficult 17/18 season, such that now, with another premier league central award and the 17/18 season out of the FFP assessment we must have loads of capacity. I think we could afford to lose £60m and still meet FFP and as you say we probably have a way to go before we even start making a loss this upcoming season...

I would even say we could afford 1 year of Messi wages if Barca fancy a loan and we don't sign anyone else! It would hurt us for the following few years of course but what a season that would be!