FFP

[bobby01]

Just seen this. https://cottageanalytica.com/2021/08/01/ffp-limits-better/

[humussapiens]

FFC is heavily losing money...

[St. Andrews White]

Good article, essentially confirms that we're losing heavily but may be more inside the limit than we thought

Sent from my SM-G960F using Tapatalk

[Craven_Chris]

Im the author of that article, so I thought it worth clarifying a point on it.

The message is that Fulham's loss limits for the coming season will, I believe, be pretty large (around £27m or maybe higher), and as such they could lose about £10m more (in FFP terms) than they did in the Parker promotion season (when they made an estimated £17m loss against FFP limits).

That is good, but there is a problem, (and this is what I will go into more in the next post on that blog) I think Fulham are on course right now to lose even more than the elevated £27m limit. Compared to the 19/20 Championship season, Fulham are in a position where, unless they do something, their expenses are higher, the contract amortisation is higher and, crucially, they have not started the season by selling Ryan Sess for £25m!

The overall message is a positive one though, when I complete the series of articles I think it will put together an argument that Fulham probably only need one major sale and maybe a couple of loans, to get back below the FFP limit, because that limit is so high this season. If they were in a position where they needed to get below the usual £13m limit, then I think they would be more in a fire sale scenario: Mitro, Anguissa, Cairney, Tosin etc would all be on the table for cash raising purposes. But as things stand, I think just one of these names (plus a couple of loans) might well do the trick.

[Porthogs FC]

Im the author of that article, so I thought it worth clarifying a point on it.

The message is that Fulham's loss limits for the coming season will, I believe, be pretty large (around £27m or maybe higher), and as such they could lose about £10m more (in FFP terms) than they did in the Parker promotion season (when they made an estimated £17m loss against FFP limits).

That is good, but there is a problem, (and this is what I will go into more in the next post on that blog) I think Fulham are on course right now to lose even more than the elevated £27m limit. Compared to the 19/20 Championship season, Fulham are in a position where, unless they do something, their expenses are higher, the contract amortisation is higher and, crucially, they have not started the season by selling Ryan Sess for £25m!

The overall message is a positive one though, when I complete the series of articles I think it will put together an argument that Fulham probably only need one major sale and maybe a couple of loans, to get back below the FFP limit, because that limit is so high this season. If they were in a position where they needed to get below the usual £13m limit, then I think they would be more in a fire sale scenario: Mitro, Anguissa, Cairney, Tosin etc would all be on the table for cash raising purposes. But as things stand, I think just one of these names (plus a couple of loans) might well do the trick.

Read your article and thanks for this follow up. Good work, let's see if Tony follows your line of FFP thought. If we have two big sales I would imagine this would put us in a very good FFP position? Say selling Mitro and Frank. So we can be in the Armstrong race?

[Craven_Chris]

Im the author of that article, so I thought it worth clarifying a point on it.

The message is that Fulham's loss limits for the coming season will, I believe, be pretty large (around £27m or maybe higher), and as such they could lose about £10m more (in FFP terms) than they did in the Parker promotion season (when they made an estimated £17m loss against FFP limits).

That is good, but there is a problem, (and this is what I will go into more in the next post on that blog) I think Fulham are on course right now to lose even more than the elevated £27m limit. Compared to the 19/20 Championship season, Fulham are in a position where, unless they do something, their expenses are higher, the contract amortisation is higher and, crucially, they have not started the season by selling Ryan Sess for £25m!

The overall message is a positive one though, when I complete the series of articles I think it will put together an argument that Fulham probably only need one major sale and maybe a couple of loans, to get back below the FFP limit, because that limit is so high this season. If they were in a position where they needed to get below the usual £13m limit, then I think they would be more in a fire sale scenario: Mitro, Anguissa, Cairney, Tosin etc would all be on the table for cash raising purposes. But as things stand, I think just one of these names (plus a couple of loans) might well do the trick.

Read your article and thanks for this follow up. Good work, let's see if Tony follows your line of FFP thought. If we have two big sales I would imagine this would put us in a very good FFP position? Say selling Mitro and Frank. So we can be in the Armstrong race?

These are the sorts of things I am exploring in the next article but my current view is that the key players for whom selling releases a lot of FFP headroom are Anguissa, Cairney, Tosin and Robinson. Those guys are on big wages and have market values (if, and its a big if, we accept transfermarkt valuation of them) which are significantly above their carrying value on the balance sheet. I would say these players each release in the order of £10m to £12m in FFP headroom if they are sold (through profit plus wages).

So if we are currently facing a £45m aebt loss (rough estimate which I hope to narrow down) and we need to get this below £27m, then selling Anguissa at £20m (booking a profit of £8m and losing his wages of £3m), plus loaning out a few others, maybe one other smaller sale, probably gets us there or there abouts.

If we also want to buy Armstrong, and Im imagining thats a £15m transfer and around £2.5m pa in wage commitments, then we need to free up more headroom and another big sale may be necessary (Mitro may be about right for that one). 

Its all speculation obviously!

[The Rational Fan]

Great Article, as stated in the articulate the formula for "adjustment of FFP for Covid-19" is fantastic for Fulham this season; but it seems the strange FFP rules could make the 2022-23 season a totally writeoff (whether in premier league or championship).

I'll need to look more carefully, but if we get promoted how will we invest and if we don't how will we stop the sell off. Tony Khan really has a choice save some money for next season selling Reed, Anguiissa or Cairney; or go all out this season with a hope this team (with maybe one reinforcement) can stay up in premier league.

Unsurprising these FFP changes (like most changes to FFP) make yo-yoing easier, breaking into the premier league for two seasons harder and ever making champions league for two seasons almost impossible. 

[The Rock]

Thank you Craven Chris. Was waiting for that update and look forward to your next update. I am in finance, but I haven't done/had the time to do my homework on FFP and this is so helpful, as is your general opinion as your understanding is extensive.

[Statto]

Surely the 'dead wood', ie players like Fabri, MLM, Seri, Mawson, Knockaert, Kongolo, Kebano, AK47 et al (depending on one's view of some of the latter names, of course) are generally now valued at close to their book value. Taking the first four in particular, I'm guessing the aggregate book value of Fabri, MLM, Seri and Mawson is about £11-12m, and surely they're worth a couple of million each. Plus we're paying them about about £10m in wages. Then in Kebano and AK47 you're probably talking pure profit on a sale, perhaps £4m for either, and another £2m each off the wage bill. So you can easily see £25m being released there just from offloading 5-6 players. I do also expect Anguissa to go, probably realising the same amount again. so with that much potentially off the P&L from players we don't really want or expect to stay, I can't see why the likes of Tosin and Mitrovic are even getting a mention.

[grandad]

I would never contemplate selling Mitro, Cairney, Tosin & Robinson. I would rather sell or release Knockaert, Kamara, MLM, Seri, Christie, Fabri & Cavaliero. They are all surplus & their wages alone would help getting off our wage bill let alone any fees we could get.

[WolverineFFC]

I would never contemplate selling Mitro, Cairney, Tosin & Robinson. I would rather sell or release Knockaert, Kamara, MLM, Seri, Christie, Fabri & Cavaliero. They are all surplus & their wages alone would help getting off our wage bill let alone any fees we could get.

Selling Cav or Knock likely worsens the FFP situation, so it is unlikely to happen. Doubt we will get enough from Kamara to be able to sell him either. MLM is a wild card because nobody outside the club really knows what his amortization is. I don't think you sell Christie, he is the backup RB. We would have to buy someone to replace him. Doesn't help the finances. Seri we all know the club want to get rid of, but there is a reason he has not left yet. I can only see Fabri out of the list you mentioned as a player to move on which can improve the FFP situation. I believe the club intends to do so if Rodak is still at the club at the end of the window.

[Statto]

I would never contemplate selling Mitro, Cairney, Tosin & Robinson. I would rather sell or release Knockaert, Kamara, MLM, Seri, Christie, Fabri & Cavaliero. They are all surplus & their wages alone would help getting off our wage bill let alone any fees we could get.

Selling Cav or Knock likely worsens the FFP situation, so it is unlikely to happen. Doubt we will get enough from Kamara to be able to sell him either. MLM is a wild card because nobody outside the club really knows what his amortization is. I don't think you sell Christie, he is the backup RB. We would have to buy someone to replace him. Doesn't help the finances. Seri we all know the club want to get rid of, but there is a reason he has not left yet. I can only see Fabri out of the list you mentioned as a player to move on which can improve the FFP situation. I believe the club intends to do so if Rodak is still at the club at the end of the window.

Cavaliero and Knockaert will have a current book value around £7-8m and wages around £2m. So selling them for anything above £5-6m each would improve the FFP position and of course remove the burden of their salary and amortization next season. Similarly with MLM, if you assume half the money on that deal with Nice was allocated to him, being 3 years into an initial 4 year deal would give him a book value around £3-4m, so once you take wages into account, offloading him for anything over £2m would probably be positive in the accounts.

[Jims Dentist]

Thanks for all the above, really illuminating.

Looking forward to more from Craven Chris.

[Craven_Chris]

Thanks for the kind words: as there seems to be interest I thought I would give an early preview of something I am working on which is relevant to this discussion.

My estimate is that Fulham would, next season, lose about £45m against their FFP limits if they dont take any action to address that. As mentioned in the article in the OP, my guess is that they are allowed, under the current covid impacted rules, to lose about £27m and possible quite a bit more (depending on how close they got to their limits last year).

All of this means, that I think they need to close the FFP gap by anywhere from £10m to £20m to avoid breaching FFP.

As mentioned by Statto, when you sell a player, there are essentially 3 things that happen to impact your FFP position, i) You make a gain or loss depending on whether the sale was for more or less than the players current book value, ii) you avoid the cost of another seasons contract amortisation and iii) you avoid paying another years wages.

I have been working on a system for estimating the various numbers that go into calculating the 3 factors above and have estimated the impact on the FFP gap of selling each player in the Fulham squad.

This is shown in the chart below...


Mind The Gap , on Flickr

So for each player we see

1) In Green, the gain that would be booked if the player is sold for their Market Value (as set out on the website transfermarkt.co.uk). This is the market value price less the current book value which is calculated as the original transfer fee paid (also gathered from transfermarkt and other online sources) multiplied by the proportion of the player contract left to run.

2) In blue, an estimate of the impact of another years contract amortisation, if the player was to stay at the club (usng much the same data as set out above)

3) In orange, an estimate of the players salary, based on some online sources (plus some judgement from me when sources conflict, all sorts of estimates out there for Fabri's salary for example) with a 20% reduction for players who I think probably have a relegation clause salary reduction.

There is uncertainty over all the numbers I have used (Tosin is said to have market value of £10m, but we know he doesn't because he had a release clause for that and no market participants triggered it) but I hope it gives an indication of the sorts of options Fulham have.

Key take away, is that actually, Anguissa (if these numbers are correct) might be enough to close a £20m gap on his own. Market value is about £22.5m (if we believe that), carrying value £10m so a gain of 12.5 on sale, plus avoid another £5m of contract amortisation and about £2.8m in wages.

A few of the bars are messed up because those players have negative value on sale, ie their market value is below their book value, but in all cases, if you could sell at market value (as Statto said) it would still benefit FFP because of the wage and amortisation saving.

Sale is not the only option of course, perhaps a loan could be used, then you basically just save the salary (orange bar) and maybe an extra loan fee (depending on the terms of the deal).

But its quite fun (if you are a nerd like me) to look at this list and work out the best way to close the FFP gap! Which players on this list save the most money relative to how important they are to the team? I think, for me, Anguissa has to go, if we can get anywhere close to the market valuation. Probably a loan too for MLM and Mawson.

Josh Onomah draws my eye as releasing a lot of value, but of course this could be a big season for him if he stays so a hard decision there. What about TC, time to cash in?

The other factor is that many of these players are unsellable in my opinion. I dont think you could give Seri away, because no-one would match his current salary, even on a free transfer. Could be loaned, or maybe keep and play him this season?

It may all be nonsense of course because of the uncertainty over the inputs, but I hope you find it thought provoking!

[WolverineFFC]

I would never contemplate selling Mitro, Cairney, Tosin & Robinson. I would rather sell or release Knockaert, Kamara, MLM, Seri, Christie, Fabri & Cavaliero. They are all surplus & their wages alone would help getting off our wage bill let alone any fees we could get.

Selling Cav or Knock likely worsens the FFP situation, so it is unlikely to happen. Doubt we will get enough from Kamara to be able to sell him either. MLM is a wild card because nobody outside the club really knows what his amortization is. I don't think you sell Christie, he is the backup RB. We would have to buy someone to replace him. Doesn't help the finances. Seri we all know the club want to get rid of, but there is a reason he has not left yet. I can only see Fabri out of the list you mentioned as a player to move on which can improve the FFP situation. I believe the club intends to do so if Rodak is still at the club at the end of the window.

Cavaliero and Knockaert will have a current book value around £7-8m and wages around £2m. So selling them for anything above £5-6m each would improve the FFP position and of course remove the burden of their salary and amortization next season. Similarly with MLM, if you assume half the money on that deal with Nice was allocated to him, being 3 years into an initial 4 year deal would give him a book value around £3-4m, so once you take wages into account, offloading him for anything over £2m would probably be positive in the accounts.

Would you expect anyone with the current financial status of the game to pay the transfer fees and/or salary you are quoting for Knock? While I hope I am wrong, I just don't see it happening.

Cav at 5 or 6 million is probably going to be a bigger hit than to keep him as I believe he currently has 3 yrs to run on his contract + an option. We may only be discussing a 1 or 2 million difference, but it is still significant enough to matter I expect.

I am not sure what to make of the MLM situation. So I cannot agree or disagree with your synopsis.

[WolverineFFC]

Thanks for the kind words: as there seems to be interest I thought I would give an early preview of something I am working on which is relevant to this discussion.

My estimate is that Fulham would, next season, lose about £45m against their FFP limits if they dont take any action to address that. As mentioned in the article in the OP, my guess is that they are allowed, under the current covid impacted rules, to lose about £27m and possible quite a bit more (depending on how close they got to their limits last year).

All of this means, that I think they need to close the FFP gap by anywhere from £10m to £20m to avoid breaching FFP.

As mentioned by Statto, when you sell a player, there are essentially 3 things that happen to impact your FFP position, i) You make a gain or loss depending on whether the sale was for more or less than the players current book value, ii) you avoid the cost of another seasons contract amortisation and iii) you avoid paying another years wages.

I have been working on a system for estimating the various numbers that go into calculating the 3 factors above and have estimated the impact on the FFP gap of selling each player in the Fulham squad.

This is shown in the chart below...


Mind The Gap , on Flickr

So for each player we see

1) In Green, the gain that would be booked if the player is sold for their Market Value (as set out on the website transfermarkt.co.uk). This is the market value price less the current book value which is calculated as the original transfer fee paid (also gathered from transfermarkt and other online sources) multiplied by the proportion of the player contract left to run.

2) In blue, an estimate of the impact of another years contract amortisation, if the player was to stay at the club (usng much the same data as set out above)

3) In orange, an estimate of the players salary, based on some online sources (plus some judgement from me when sources conflict, all sorts of estimates out there for Fabri's salary for example) with a 20% reduction for players who I think probably have a relegation clause salary reduction.

There is uncertainty over all the numbers I have used (Tosin is said to have market value of £10m, but we know he doesn't because he had a release clause for that and no market participants triggered it) but I hope it gives an indication of the sorts of options Fulham have.

Key take away, is that actually, Anguissa (if these numbers are correct) might be enough to close a £20m gap on his own. Market value is about £22.5m (if we believe that), carrying value £10m so a gain of 12.5 on sale, plus avoid another £5m of contract amortisation and about £2.8m in wages.

A few of the bars are messed up because those players have negative value on sale, ie their market value is below their book value, but in all cases, if you could sell at market value (as Statto said) it would still benefit FFP because of the wage and amortisation saving.

Sale is not the only option of course, perhaps a loan could be used, then you basically just save the salary (orange bar) and maybe an extra loan fee (depending on the terms of the deal).

But its quite fun (if you are a nerd like me) to look at this list and work out the best way to close the FFP gap! Which players on this list save the most money relative to how important they are to the team? I think, for me, Anguissa has to go, if we can get anywhere close to the market valuation. Probably a loan too for MLM and Mawson.

Josh Onomah draws my eye as releasing a lot of value, but of course this could be a big season for him if he stays so a hard decision there. What about TC, time to cash in?

The other factor is that many of these players are unsellable in my opinion. I dont think you could give Seri away, because no-one would match his current salary, even on a free transfer. Could be loaned, or maybe keep and play him this season?

It may all be nonsense of course because of the uncertainty over the inputs, but I hope you find it thought provoking!

Nice graph. Shows how each player weighs on the club financially very clearly.

I think you are spot on with the FZA analysis. It makes too much sense to cash in on him now if you get to keep the majority of the squad intact by doing so.

[The Rational Fan]

Thanks for the kind words: as there seems to be interest I thought I would give an early preview of something I am working on which is relevant to this discussion.

My estimate is that Fulham would, next season, lose about £45m against their FFP limits if they dont take any action to address that. As mentioned in the article in the OP, my guess is that they are allowed, under the current covid impacted rules, to lose about £27m and possible quite a bit more (depending on how close they got to their limits last year).

All of this means, that I think they need to close the FFP gap by anywhere from £10m to £20m to avoid breaching FFP.

As mentioned by Statto, when you sell a player, there are essentially 3 things that happen to impact your FFP position, i) You make a gain or loss depending on whether the sale was for more or less than the players current book value, ii) you avoid the cost of another seasons contract amortisation and iii) you avoid paying another years wages.

I have been working on a system for estimating the various numbers that go into calculating the 3 factors above and have estimated the impact on the FFP gap of selling each player in the Fulham squad.

This is shown in the chart below...


Mind The Gap , on Flickr

So for each player we see

1) In Green, the gain that would be booked if the player is sold for their Market Value (as set out on the website transfermarkt.co.uk). This is the market value price less the current book value which is calculated as the original transfer fee paid (also gathered from transfermarkt and other online sources) multiplied by the proportion of the player contract left to run.

2) In blue, an estimate of the impact of another years contract amortisation, if the player was to stay at the club (usng much the same data as set out above)

3) In orange, an estimate of the players salary, based on some online sources (plus some judgement from me when sources conflict, all sorts of estimates out there for Fabri's salary for example) with a 20% reduction for players who I think probably have a relegation clause salary reduction.

There is uncertainty over all the numbers I have used (Tosin is said to have market value of £10m, but we know he doesn't because he had a release clause for that and no market participants triggered it) but I hope it gives an indication of the sorts of options Fulham have.

Key take away, is that actually, Anguissa (if these numbers are correct) might be enough to close a £20m gap on his own. Market value is about £22.5m (if we believe that), carrying value £10m so a gain of 12.5 on sale, plus avoid another £5m of contract amortisation and about £2.8m in wages.

A few of the bars are messed up because those players have negative value on sale, ie their market value is below their book value, but in all cases, if you could sell at market value (as Statto said) it would still benefit FFP because of the wage and amortisation saving.

Sale is not the only option of course, perhaps a loan could be used, then you basically just save the salary (orange bar) and maybe an extra loan fee (depending on the terms of the deal).

But its quite fun (if you are a nerd like me) to look at this list and work out the best way to close the FFP gap! Which players on this list save the most money relative to how important they are to the team? I think, for me, Anguissa has to go, if we can get anywhere close to the market valuation. Probably a loan too for MLM and Mawson.

Josh Onomah draws my eye as releasing a lot of value, but of course this could be a big season for him if he stays so a hard decision there. What about TC, time to cash in?

The other factor is that many of these players are unsellable in my opinion. I dont think you could give Seri away, because no-one would match his current salary, even on a free transfer. Could be loaned, or maybe keep and play him this season?

It may all be nonsense of course because of the uncertainty over the inputs, but I hope you find it thought provoking!

Nice graph. Shows how each player weighs on the club financially very clearly.

I think you are spot on with the FZA analysis. It makes too much sense to cash in on him now if you get to keep the majority of the squad intact by doing so.

Great Graphic, although I estimate the orange for players bought in 2019 and 2020 to be significantly higher, given that we spent £55m in 2019 and £51m in 2020 on transfers. Lowering Tosin, Reid, Hector, Reed, and Cav in terms on profitability sales. Other than that the logic is perfect, Anguissa and Cairney being the best sales financially forggeting about football. Bring in Grimes, sell Reed, Anguissa and/or Cairney, then get promoted and then reinforce midfield next summer.

[S.F.Sorrow]

Very interesting, thanks Craven_Chris!  :54:

There is one thing I don't understand though. I keep seeing Cairney mentioned as a player we could sell to avoid problems with FFP. Surely his market value (Transfermarkt) can't be that high? Who would want to spend that kind of money on a player with a dodgy knee who hasn't played regularly since the last ice age? I would have expected his true market value to be close to nothing by now.

[Craven_Chris]

Very interesting, thanks Craven_Chris!  :54:

There is one thing I don't understand though. I keep seeing Cairney mentioned as a player we could sell to avoid problems with FFP. Surely his market value (Transfermarkt) can't be that high? Who would want to spend that kind of money on a player with a dodgy knee who hasn't played regularly since the last ice age? I would have expected his true market value to be close to nothing by now.

Thanks! Im inclined to agree with you, there are a few valuations which dont feel right to me, although most are in the ballpark of what I would expect. Im not sure how it takes into account the players contract and wages - Seri is valued at £3.6m, but is anyone going to pay money to transfer a player who must be on £50k-£60k pw with his recent track-record, especially as he has 1 year left on his contract so, presumably, could be picked up next summer for free and much lower wages?

The economist in me doesn't like that Gazzaniga has a positive market value either, he literally just tested his market value and Fulham defined that with their wage offer. If Fulham tried to sell him tomorrow, I dont think they would get £2.5m for him, if anyone was willing to part with that for his services, on top of his wage expectations, they would already have done so, last month, when they had the chance!

I agree on Cairney too, I would be surprised if we could get that kind of money for him, but on the whole, I figure that website is probably better at valuing players than me, so I deffer to them for the purposes of this exercise!

[Craven_Chris]

Great Graphic, although I estimate the orange for players bought in 2019 and 2020 to be significantly higher, given that we spent £55m in 2019 and £51m in 2020 on transfers. Lowering Tosin, Reid, Hector, Reed, and Cav in terms on profitability sales. Other than that the logic is perfect, Anguissa and Cairney being the best sales financially forggeting about football. Bring in Grimes, sell Reed, Anguissa and/or Cairney, then get promoted and then reinforce midfield next summer.

Thanks TRF - There was actually a discussion about that very point on another thread recently (I dont recall which) as those figures in the accounts imply we spent £55m on Hector, BDR, Cav and Jordon Archer then a further £51m on Knockeart, Reed, Kongolo, Tosin, Robinson and Tete. The press (and transfermarkt) quote much lower fees than that. I think Statto suggested that the figures in the accounts (labelled expenditure on acquiring player registrations I believe) must include loan fees as well, and I would agree with that assessment. Especially as, if we did pay that much, not only are the valuations in the graphic wrong, but my estimate of the loss Fulham will make next year (already extreme at -£45m) is way too low, the extra amortisation of contracts would push that towards the £60m-£70m loss range! In which case the FFP gap would be much larger, and our ability to close it much smaller, than I have described, which would be bad.

So I hope, but don't know, that the account figure includes the loan fees!