Fulham Financials 2021/22 Part 1: Did Fulham breach FFP rules? (Part 2 Added)

[Friendsoffulham]

Fulham Financials 2021/22 Part 1: Did Fulham breach FFP rules?



Overview

This is a first of a series of posts looking at Fulham's finances and their position vs FFP.

In this post, I calculate that, in my opinion, Fulham have complied with their requirements under FFP up to the end of the 2021/22 season.

However this calculation is based on two key assumptions:

1) That Fulham's adjustment's made with respect to the cost of COVID will be deemed reasonable, particularly their probable claim that they should write off a chunk of squad value and attribute that to COVID.

2) That promotion bonuses are exempt from the FFP calculation (which everyone says they are, but crucially the rules don't say).

The table below shows my best calculation of the clubs Adjusted Earnings Before Tax against the FFP loss limit:



It shows that Fulham's cumulative Earnings before tax over the FFP assessment period were -£167.5m which is considerably more than the loss limit for Fulham of £72m.

However (subject to the key assumptions above), I calculate the following adjustments to that Earnings Before Tax figure:

• £27.1m for depreciation of tangible fixed assets
• £30m for Youth development expenditure
• £600k for Women's Football Expenditure
• £300k for Community Development Expenditure
• £20.6m for COVID costs and,
• £26.25m for Promotion Bonus adjustments
• All of which leads to an Adjusted Earnings Before Tax figure of -£62.6m which is within the FFP loss limit of £72m.

The rest of the article is the detailed story of how these figures have been arrived at.

Introduction

This article is going to set out the calculations I have used to determine if Fulham have breached FFP rules as at the end of the 2021/22 seasons based on the financial statements for that season, which have just been released.

There is no indication that Fulham have breached FFP rules, but it is well known that the club has been under pressure from the FFP limits due to the complications caused by yo-yoing between the Premier League and the EFL Championship while trying to absorb some heavy transfer fees paid out on (largely ineffective) players in the summer of 2018.

So let's start with the rules that Fulham are subject to at the end of the 21/22 season. That was a season where Fulham were in the EFL Championship for that season the key rules we are interested in are the EFL Profit and Sustainability Rules for EFL Championship clubs (you can read those here )

These rules are more or less identical to the Premier League Profit and Sustainability Rules. The rules place restrictions on clubs as follows:

All championship clubs must calculate a total 'Adjusted Earnings Before Tax' (AEBT) figure for the FFP assessment period. That total AEBT figure must be less than an upper threshold for that period set in the rules.

The FFP Assessment Period

Normally the FFP assessment period is just the last 3 seasons...but COVID complicated matters somewhat.

One of the effects of COVID was that the 2019/20 season got suspended in the Spring and didn't resume until the summer. One consequence of this was that many fixtures for the 2019/20 season got moved into the financial year that clubs have for the 2020/21 season. This means that clubs played way more games in the 20/21 financial year than they did in the 19/20 year, and this meant a lot of wages and revenues from 19/20 moved into the 20/21 year as well. This made calculating FFP and reporting financial performance difficult.

The solution to this, from an FFP point of view, was to combine the 2019/20 and 2020/21 financial years into a single period for the purposes of FFP assessment, and then just divide all the figures by 2, to give an average FFP performance for the 2 seasons.

To cut a long story short, this means that the FFP assessment covers the following 3 time periods

Period 1: Financial year 2021/22

Period 2: The average of financial years 2019/20 and 2020/21

Period 3: Financial year 2018/19

The FFP AEBT Loss Threshold

The rules explain how to determine how much money Fulham can lose in their AEBT measure (explained below) across the FFP assessment period. The rules explain that a club is allowed to lose:

• £13m in an EFL Championship season and
• £35m in a Premier League season

So for Fulham we can look at the seasons covered by the FFP Assessment Period and work out the total AEBT loss threshold

For Period 1 (Season 2021/22) Fulham were in the EFL Championship: Loss threshold £13m

For Period 2, Fulham were in the Premier League for season 2020/21 (Limit £35m) and the EFL Championship for 2019/20 (Limit £13m). As per the methodology above, we take the average of these to find the loss limit, (13 + 35) / 2 = £24m

For Period 3 (Season 2018/19) Fulham were in the Premier League: Loss Threshold is £35m.

So the total FFP AEBT Loss Threshold for Fulham is £13m + £24m + £35m = £72m

Adjusted Earnings Before Tax (AEBT)

So we know that Fulham are allowed to lose a total of £72mn across the FFP assessment period on an 'Adjusted Earnings Before Tax' basis. But what is AEBT anyway?

Well, it's a calculated figure for each of the 3 time periods in the FFP Assessment period. The calculation starts with a figure taken straight from the financial statements, the Earnings Before Tax. Then the FFP rules say you can make some adjustments to this Earnings Before Tax figure. These adjustments essentially reverse out of the calculation of Earnings before tax things which football authorities want to encourage football clubs to spend money on. They also remove other items of expense which the league thinks are unfair to capture in the FFP assessment. The adjustments are listed below in the extract from the league rules, but I will explain them in more detail later in the article (because we have to calculate them).



We have already calculated Fulham's Loss Threshold, but to know if Fulham have breached that Threshold, we are going to have to calculate the AEBT.

This is hard to do because not all of the figures needed to do it are published in the financial statements. Where the numbers are disclosed, I will use them, but where they are not, I will estimate them.

In doing the calculations, I will use the following table which I have put together:



This table sets out the overall FFP calculation we must do, it starts with the Earnings Before Tax figure at the top for each Time Period, (each time period is shown in a different colour) and then leaves space for all the adjustments needed to turn that figure into the Adjusted Earnings Before Tax figure (AEBT) at the bottom.

The final row shows our calculation of the FFP AEBT Loss Threshold. The time periods are summed into a total on the far right, so at the bottom of that far right column we will end up with our Total AEBT figure which we can compare to our total loss threshold (already calculated as £72m).

You may notice that I have already filled in the Earnings Before Tax row at the top. This is taken straight from the Profit and Loss accounts published by Fulham.

You can see that the total Earnings Before Tax for the FFP assessment period are -£167.5m, so we can see that for Fulham to not breach FFP rules, we need to find around £96m of adjustments.

Making Adjustments

Adjustment 1: Depreciation and/or Impairment of tangible fixed assets

The first adjustment we are going to make is for 'Depreciation and/or Impairment of tangible fixed assets'.



This is quite an accounting / technical adjustment, but it basically means that where Fulham owns things like land, buildings or machines, these may lose value over time, but we don't have to count this lost value in the FFP calculation so we can add such costs back into the AEBT figure. For Fulham the main tangible fixed assets are Craven Cottage itself and Motspur Park.

The accounts give pretty clear information on this, for example this extract from the latest accounts summarises changes to tangible fixed assets and shows a depreciation charge of just over £2m for tangible fixed assets.


This £2m is fairly typical for Fulham and we can get that number for all previous years in the accounts and enter it into our calculation table.

There is one season though where there is an added complication, the extract from the accounts for the 2018/19 season is shown below:




Here I have highlighted 3 elements that make up the impairment charge to tangible fixed assets and one of them is large at £21.5m.

This impairment charge is the result of Fulham decommissioning and demolishing the old Riverside Stand and, in the process, reducing the value of Craven Cottage by this amount. This is also FFP exempt and we can put it into our table as an adjustment:



So here is our updated table, and the first adjustment is complete. The good news is we have found a total of £27.1m of FFP adjustments already, so we are well on the way to FFP compliance!

Adjustment 2: Amortisation/Impairment of goodwill and other intangibles (excludes player registrations)

This is another accounting technical adjustment and this is an easy one. Fulham have two types of intangible assets, Goodwill and Player Registrations. Player registrations in not included in this adjustment and Fulham have never impaired or amortised the £3m of goodwill on their balance sheet.

This means there is no adjustment to be made, another line of our table is complete!



But this has brought us no closer to FFP compliance!

Adjustment 3: Youth Development Expenditure

This is the first adjustment where we will need to make some estimates. Youth development expenditure is defined as follows in the rules:



So for the sake of our calculation, it covers Fulham's spending on its academy. The accounts give us no information on how much Fulham spends on this unfortunately, so we must estimate entirely.

What we know is that Fulham run a 'Category 1' and highly successful academy, and the website lists 14 employees of the academy as well.

I have done some research on this, but while it is hard to find figures for academy running costs the data points I have are these:

• In 2012 the Football Supporters Association estimated a Category 1 academy would cost £2m a year to run

• In 2018, Statista gathered data from the top two Bundesleague divisions and found they spent, on average, £4m a year on academies.

• Aston Villa actually set out their youth development spending in their accounts, and the latest show it as £13.9m for 2021/22 and £10.8m the previous season.

I don't really know how Aston Villa's academy compares to Fulham's, the only real comparison I can find is that Wikipedia lists 23 employees of the Villa academy and Fulham's website lists 14 employees. But, without sounding too snobbish, Fulham's academy is in West London...

For the purposes of this exercise, I am going to estimate an annual expenditure of £10m for Fulham's academy.

We are now ready to punch these numbers into our FFP assessment table:



This has given us a nice £30m adjustment, we only have a little over £38m to go to FFP compliance!

Adjustment 4: Women's Football Expenditure

With respect to the Fulham women's team, my understanding is that after turning professional in the early Al Fayed era, there was a subsequent disbanding of the team which has recently reformed. However my understanding it is not formed on a professional basis (please correct me in the comments if this is incorrect). I believe that since 2018 the women's team has played and trained at Motspur Park however, which presumably means a portion of the facilities running costs could be allocated to the women's team.

The website lists coach Steve Jaye and Carla Joseph as part of the coaching staff, although I believe at least Steve Jaye has other roles at the club (reference a 2021 Peter Rutzler Athletic article).

I am going to estimate the cost of running these teams (including a women's development programme) to be relatively low driven in large part by an allocation of Motspur Park expenses. I will estimate it at £200,000.

This figure can now go into our adjustment table!



Adjustment 5: Community Development Spending

Community Development Expenditure is defined as follows in the rules:



It includes charitable donations and we can see from the accounts that Fulham typically donate around £75k to the Fulham Foundation. As for the expenditure by the club to activates to promote participation in sport and social development, I have very little information on that. So I am going to round this to £100k for my adjustment estimate.

This can now go in the table:



Adjustment 6: COVID Costs

This is a tricky one, fraught with potential controversy. But at least we do have some information in the accounts to help us. First of all, the rules which state:



A lot to digest there but the key points are:

Clubs can add back into AEBT lost revenues due to Covid (like lost gate receipts from playing behind closed doors) and remove additional costs that may have been incurred.
The rules sets out the level of costs it will accept without asking too many further questions (£5m a year in 19/20 and 20/21 plus £2.5m in 21/22) but says it is willing to discuss larger adjustments, it just needs more information to assess them
Fulham don't set out anywhere exactly what adjustment they think they are entitled to, but we can have a reasonable go at estimating what they are likely to think.

Firstly there is the matter of lost revenue due to COVID. The extract from the accounts below breaks down Fulham's revenue from the main covid impacted seasons (19/20 and 20/21)



Note that 20/21 was in the Premier League and 19/20 in the Championship.

The next extract shows the same figures for the 2018/19 (Premier League) and 2017/18 (Championship) seasons.

If we assume the pre-pandemic seasons represent normal income for these divisions, and the pandemic seasons the Covid income, then the difference can be assumed to be the impact of Covid on revenue!

From these numbers we can see that:

• Gate Receipts were £11,866k lower during the pandemic

• Sponsorship was £6,726k lower during the pandemic

So it looks to me like a reasonable case can be made that there was a loss of revenue of about £18.6m during the pandemic.

There is another factor here as well, many clubs argued that the pandemic caused a collapse in transfer prices, and reduced the value of players contracts on the balance sheet. Fulham might have argued that the price they were being offered for key players like Anguissa or Mitrovic during the pandemic was less than it otherwise might have been.

We can be pretty sure that Fulham made this argument because in their accounts for the 2020/21 season we see the following entry:



This tells us that Fulham have made a one off reduction in the value of their squad of £20.9m. This write-off then forms part of the loss before tax. I am certain that Fulham will have claimed this write-off as a covid expense.

Fulham may also claim that in not being able to sell players during the pandemic, they also had to pay additional wages beyond what they otherwise might have had to.

For the purposes of this analysis, I am going to add the £20.9m player impairment charge as a covid adjustment in our table in the 20/21 season.

I am also going to apply a small AEBT uplift to reflect that many of the key players (like Anguissa) were later sold by the club, and in doing so, the fact that Fulham had already written down their value, would have inflated the profit Fulham recognised on the sale and I understand they would have had to offset that gain against their Covid adjustment (with thanks to @Somethingnew223 on Twitter for this point) Im going to estimate a £5m AEBT uplift to reflect this.

For one final adjustment, I note that the Championship rules allow up to £2.5m of COVID costs in the 21/22 season without detailed analysis, so I am going to assume Fulham claimed such costs.

We now have a new set of adjustments to put into our table for COVID:



We are now getting close to the FFP limit, only about £17m of adjustments left to find in the last two categories.

However, Im going to now narrow this down to 1 category, and a difficult one, because the final category (2021/22 Fixed Asset Sales) does not apply to Fulham (this basically means you are not allowed to sell and lease back your stadium which was added after a number of clubs including Derby County did this).

So that brings me to the last adjustment...

Adjustment 7: Promotion Bonuses

Or is it an adjustment at all???

The issue here is this: most Championship clubs reward players with very large bonuses when they get promoted. My estimation is that Fulham paid out to the players somewhere in the region of £15m to £20m each time they got promoted to the premier league.

Most experts on FFP including Kieran Maguire and Swiss Ramble say that such expenses should be deducted from the FFP calculation. Fulham also said this themselves in a meeting with the FST in April 2020 (see minutes).

This sort of makes sense, because clubs cant really predict if they will get promoted and its hard to plan your FFP compliance when you don't know if you will suddenly have to pay your players millions of pounds in bonuses. You could also have a crazy situation where a team in the playoff final suddenly realised they couldn't afford to win the game without triggering an FFP breach.

But it also doesn't entirely make sense to me that promotion bonuses are completely exempt, after all the FFP rules could then be bypassed by a rich oligarch owned club offering Mbappe and Messi a huge wage based entirely on promotion bonuses, on the assumption they would storm the league!

The problem I have is this, I have read both the Premier League and Championship FFP rules in detail, and no where does it say that promotion bonuses are exempt.

Indeed all the exemptions are set out clearly in the rule extract I showed previously (reproduced below), and promotion bonuses are not mentioned.



So I have a problem, the most foremost experts on FFP and also Fulham themselves say promotion bonuses are FFP exempt. But the actual rules don't say that. This is a big deal for Fulham, who, as a yo-yo club, usually find they have paid promotion bonuses twice in any given FFP Assessment Period!

Google doesnt help, if I search for an answer to this problem I mostly just see my own blogs, Twitter feeds and forum posts where I have hunted down experts to ask them (unsuccessfully) about this issue. If the only google returns on this problem are my own attempts to solve it, it suggests Im operating in a pretty niche area of interest!

So what will I assume here?

First of all I will estimate the size of the promotion bonus paid at £17.5m as I think this is reasonable based on analysis of Fulham's wage structure and other clubs.

And we know the relevant seasons for paying this are the 21/22 and 19/20 seasons.

If I assume (like most FFP experts) that Promotion Bonuses are fully excluded from the calculation, then our final AEBT table looks like this:



This shows an AEBT loss of £62.6m against a limit of £72m, in other words Fulham are compliant with FFP with around £10m to spare!

If we assume that Promotion Bonuses are deferred (which I think makes sense, but the rules also don't support this) then the final table looks like this:



This shows an AEBT loss of £88.9m against a limit of £72m, which is an FFP breach! The reason this is so bad is that it brings the promotion bonus paid to the 17/18 Jokanovic promotion team into the assessment period! The result is actually the same if we assume no adjustment for Promotion Bonuses at all.

Final Word

So it looks to me like Fulham probably are FFP compliant if we allow that their COVID adjustments are reasonable and, crucially, if promotion bonuses are exempt from FFP (which everyone except the actual rule book seems to agree on).

I hope you have enjoyed this journey through the accounts. If you have any comments or disagree with any assumptions, please put them in the comments or find me on Twitter (@cottageanalytic) and let me know.

The next articles planned based on these accounts will cover:

• a prediction: will Fulham breach FFP in the current 22/23 season

• What spending capacity might Fulham have in summer 2023!

Link to full article by Cottage Analytica

[Scotweiler]

Well, I am a professional portfolio manager and I read financial analyses for a living.  Not to sound patronising but this is great work and presented with brilliant clarity.  Thank you and well done.

[Craven_Chris]

Well, I am a professional portfolio manager and I read financial analyses for a living.  Not to sound patronising but this is great work and presented with brilliant clarity.  Thank you and well done.

Thanks, just saw your comment and I appreciate that feedback! There is a part 2 to this coming soon (covering financial performance in the current season) and then a part 3 (on how much Fulham can spend this summer)

[bigalffc]

This is an amazing article and has explained FFP and compliance brilliantly.
Thank you and I look forward to future instalments.

[Mullers OG]

Congratulations on a stellar piece of work.  I for one am far better informed as a result.

[Andy S]

And that is why very few people understand ffp rules

[WindyCity]

Eeesh....my eyes are bleeding!  I can't read all of that gobblty-gook, nor am I smart enough to understand any of it even if I did take time to read.

Can someone define for me FFP in a "NUTSHELL"?  Please, as brief as possible.  I still can't understand why 'small' clubs are not allowed to spend as much as the top 'big' teams.  I understand that grounds attendance and revenues produced from such are part of the equation, but there has to be much more than that to produce the huge differences in allowable spending.  Why can't FA or other governing bodies set up rules for a more even playing surface? 

I'm a dope, please help me.

[Craven_Chris]

Eeesh....my eyes are bleeding!  I can't read all of that gobblty-gook, nor am I smart enough to understand any of it even if I did take time to read.

Can someone define for me FFP in a "NUTSHELL"?  Please, as brief as possible.  I still can't understand why 'small' clubs are not allowed to spend as much as the top 'big' teams.  I understand that grounds attendance and revenues produced from such are part of the equation, but there has to be much more than that to produce the huge differences in allowable spending.  Why can't FA or other governing bodies set up rules for a more even playing surface? 

I'm a dope, please help me.

The nutshell explanation is that there is a limit on the amount of money a football club can lose. This reduces the risk that through imprudent management, an owner will drive a club into bankruptcy.

This does mean that the more money a club makes, the more it can spend. But one could argue that this is fair, the biggest most successful teams can afford the best players.

These rules do restrict the spending the big clubs can do, so they do have some field leveling aspects. For example Man City and PSG have essentially unlimited financial resources, but they are not permitted to use them all by these rules.

I once wrote an article which started with an FFP primer, which may be helpful, but still some knowledge of accounting is required. It's Here

[Burt]

Interesting how gate receipts are a drop in the ocean compared to other sources of income, and yet the club have chosen to hike up season ticket rates for next season.

[Friendsoffulham]

Fulham Financials 2021/22 Part 2: Predicting Fulham's 2022/23 Financial Performance



Overview

In this post, I estimate the financial performance for Fulham FC for the 2022/23 season (which is in progress at the time of writing).

The key conclusion I reach is that I believe Fulham will report a significant profit for this period, which will be only the third time the club has reported a profit at all (and never on the scale of this) since the beginning of the Al-Fayed era.

This has been achieved by a combination of the following factors:

• The transfer fee amortisation and over-payment of player salaries associated with the clubs summer 2018 spending spree is now materially at an end.

• In part, this is due to a fairly ruthless cutting of non-essential playing staff at the end of the 21/22 Championship winning season

• These player cuts created headroom to bring in new players, and the club used this headroom to bring in around a dozen players whose value was in some way impaired (by this I mean that many of the players did not have a track record to suggest with confidence that they could perform at the desired level).

• However, the recruited players have, in most cases, performed well above expectation for their cost and profile, resulting in a disproportionately successful season on the pitch. Despite a recent dip in form, I have assumed Fulham can finish in 11th place, and this would release significant merit-based pay in their central award for the season.

Subject to the assumption that Fulham are able to broadly maintain current league position and that the estimated salaries and transfer fees shown online for the playing staff are broadly accurate, I am expecting Fulham to report a profit for the season of around £30m.

This has significant implications for the clubs spending capacity going forward and that will be the subject of my next post.

Introduction

This post seeks to do two things:

1) Estimate the Adjusted Earnings Before Tax figure for the current 22/23 season
2) Use this number to determine the FFP position at the end of the 22/23 season

The challenge for this will be that the 22/23 accounts will not be published for another year, but I believe that there is enough information in existing accounts to have a good go at estimating the numbers required.

For the first part of the challenge, I will be estimating numbers to go into this table which I will use to calculate the unadjusted Earnings Before Tax figure for the 22/23 season.



I will then take the resulting figure and plug that into this FFP calculation table which will allow me to make allowable FFP adjustments to derive the Adjustment Earnings Before Tax figure and then calculate the overall FFP position.



This table is already completed for previous time periods in the FFP assessment period (see part 1 to this series for more on this).

Turnover

In order to estimate the club's turnover for the 2022/23 season, it is helpful to start by looking at, and benchmarking to, a previous year where Fulham where in the Premier League. For the purposes of this exercise, I have shown below an extract from the 2018/19 season accounts as that was a Premier League season before the pandemic, which would have had a major impact on some of these numbers.



Its interesting to note how little of the club's turnover comes from gate receipts, particularly in the Premier League. In the season above, £10.6m out of £137.7m comes from ticket sales (7.7%).

In the 2018/19 season the old Riverside stand was still operational, and average attendances at the Cottage were 24,371.

So far this season, with the new Riverside stand partially open, average attendances have been 23,502. This number will creep up in the season run-in as the capacity of the stadium has gradually increased through the season (now about 24,500).

Season ticket prices have also increased, and individual ticket prices have been high (and controversial). Its hard to estimate the actual impact of the ticket prices on gate receipts (and also note that Fulham had a bit of a cup run including a tie at Old Trafford). But I am going to estimate a fairly significant increase in Gate Receipt income to about £14m. This is not based on any real calculations, but a rough estimate.

Central Awards and Broadcasting is essentially the TV money. It includes a considerable 'merit' based element, where the higher you finish in the league the more money you get. I'm going to assume Fulham finish 11th (based on my Monte Carlo simulations) and then look at the money that last year's 11th placed team got (that was Newcastle).

Newcastle received £125.3m in Central Award/TV money. So I will assume this is what Fulham get.

Finally, there is the Sponsorship and other Commercial Activities, this is hard to judge, I am going to estimate this is the same as 2018/19 (the last pandemic free Premier League season) and therefore £17.7m.



Putting this together in the table above gives us a turnover of £157m.  This would be, by some distance, a record for the club.

We can now add this to our Earnings Before Tax calculation



Profit on Disposal of Player Registrations

This is the profit that the club makes from selling players. This is not the same as the total transfer fees received, but is, instead, the transfer fee received, less the carrying value of the player on the balance sheet. I have written about the way players are valued on the balance sheet before and you can read about that here (link)

During the 2022/23 season, only one player left Fulham for a transfer fee, that's Anguissa (the Carvalho transfer went through in the 21/22 season).

Anguissa is reported by Transfermarkt to have left for a fee of £14m.

To calculate the profit on this sale, we need to know the carrying value on Anguissa's player registration at the time of the transfer.

Transfermarkt says that Fulham signed Anguissa for £21m (other sites report the figure as being £25m) in the summer of 2018 as part the huge (and unsuccessful) expenditure which occurred then. The figure of £25m is the one I have seen most often so I will use that.

Anguissa initially signed on a 5 year contract, so his carrying value has been amortising by £5m a year.

After 3 years (taking him to summer 2021) his carrying value had therefore reduced to £10m. He then signed a contract extension, leaving him with a further 3 years to run on the contract.

The amortisation of the remaining £10m of value then becomes £3.33m per year.  One year later, he is sold to Napoli for the £14m figure. At this point his carrying value is £6.66m so the profit Fulham make on the transfer is £14m – £6.66m = £7.34m

This calculation looks about right as the 21/22 accounts do say that Fulham gained £7.4m in profit from player sales after the end of the accounting period, so this matches closely calculation for Anguissa above

This means we can add the Anguissa sale to our Earnings Before Tax calculation:



Also to note in the table above, Fulham don't normally sell any tangible assets, and I have no reason to think they did this season, so I have filled in that row as nil also.

Wages and Player Registration Amortisation

This is probably the hardest part of our calculation, we have to estimate the cost of players for the 21/22 season. This has two main components:

The wages paid to players during the season
The amortisation of transfer fees paid for the current squad.
These are quite core accounting concepts for football clubs, and I have explained them before in some detail here

My approach to this will be to look at the wage and transfer fee amortisation from last season (21/22 in the Championship) and then adjust this to remove the costs associated with players that have now left the club, and then add the estimated costs of the players Fulham added to the squad in the 22/23 season.

So the first step is to set out the player wage and amortisation costs as per the annual accounts:



Fulham spent a total of £121.4m on players in the 21/22 season in the accounts. We know that the wages also include the promotion bonus paid to the players as well, which I have previously estimated at £15m. I have deducted this promotion bonus from the wages paid, and have also applied a 10% uplift. This is because I assume that there will be players whose contracts entitles them to higher pay in the Premier League (we know some of them had relegation wage drops built into their contracts).

The application of these two assumptions gives a total expenditure on players for the 21/22 season of just under £114m.

The next step is to consider the impact on this figure of the players who left the club (either permanently or on loan) at the end of last season. I have captured both their wage (looking this up from various online sources) and a calculation of the annual transfer fee amortisation associated with each player.



These adjustments are set out in the table above, and show a reduction in the baseline player cost to £82.4m associated with the retained Championship winning squad.

Next we have to consider the costs associated with the new players added to the squad for the 22/23 Premier League season. Again online sources have been used to assess the wages and transfer fee amortisation for each player.



This table shows the final estimation of the player costs for the 22/23 season (I will check back in a year to see how accurate this was). It shows an outlay of £130.5m on the playing staff including £96.3m on staff wages.

We can put this figure into our Earnings Before Tax calculation. I have also added expenses for fixed asset depreciation and other operating expenses, and here I have taken typical numbers from previous years accounts (they are not usually material).


All of which leads to the surprising conclusion that Fulham are estimated to have turned a fairly sizable profit (before tax) of £31.6m for the 22/23 season. This would only be the third time Fulham FC has had a profitable season since Mohamed Al-Fayed took ownership of Fulham over 25 years ago.

22/23 FFP position

If we plug our Earnings before Tax calculation into our FFP position calculator for the end of the 22/23 season we see the following:



The outcome at the bottom left that Fulham were allowed to lose £72m on a Adjusted Earnings Before Tax basis, but the actual AEBT loss for this period is estimated at only £14.9m. Giving Fulham around £57m in FFP headroom at the end of the 22/23 season! This is probably the strongest FFP position the club has been in since FFP was introduced.

I will write more of this in the final part of this trilogy, which will look at spending capacity for the Summer 2023 transfer window.

Link to Full Article by Cottage Analytica

[WolverineFFC]

Thanks for the breakdowns, very informative. I am looking forward to part 3. With the club looking profitable, staying in the Premier League for a 2nd season AND the removal of a few more amortization fees (BDR, Bryan, and Knock) I am very interested in what predictions you come up with.

[toshes mate]

Thank you very much for this information and for producing it in such a way that even a person such as I who normally uses financial papers as a means of falling asleep more quickly or (more pertinently) as stuff I need to do in order not to experience future sleepless nights.

With the addition of Part 2 even I have been able to deduce that the Club's financial performance has thankfully moved on from the somewhat over excited and htherefore effectively its most recent lowest ebb in summer 2018 without falling asleep. I also believe this work clarifies why it is so important for football clubs to have staff who have seen most of the tricks of the football trade used to survive, without being further imperilled, many times before.

And so thank you for producing this stuff. You'll understand if I say I am not looking forward to Part 3 but I will read it with some anticipation of financial enlightenment nonetheless.

Thanks for all the hard work.