It won't really affect us in our first season back down due to the parachute payment for this year being a comparative fortune compared to what the other Championship clubs get. This explains the FFP rules which have been in force since 2016/17: http://www.financialfairplay.co.uk/financial-fair-play-explained.php The clubs voted to water it down a fair bit after we went up.
That's interesting. So if I'm reading this correctly, we can lose up to £105m over three seasons before we trigger the Financial Fair Play rules. That's quite a lot. So we can comfortably use outside funds, to artificially boost us if we wanted to for three seasons before we will be scrutinised. Basically, we'll not even be looked for until the end of season 2022-23. It's a massive advantage being a relegated club if you've been in the Premier League for over 3 consecutive seasons. We must take advantage of this.
......yes but of course if we were to lose that much over the next 3 years the club would be dead anyway if we hadn't got promotion.
Clubs report at each year end. The way I read it is for the 3 years up until this season we can report £105m of losses to the EFL because we were in the PL for all 3. Then next year the limit at year end will be £83m and then the year after that £61m. I think your overall conclusion is right, though Villa were tripping up over it in the third year down and had to sell Villa Park to get within the limit.
Am I right in saying selling the ground is just a way of cooking the books? They just sell it to the owner and show at as income on the balance sheet, but they don’t actually sell it to a third party as such? Bit of a break in case of emergency option to buy a bit of time.
Yes it’s entirely a means of circumventing the FFP rules in the manner you describe. And it makes such a mockery of the rule that I’m astonished the EFL has allowed it, provided the owners don't mess up ridiculously like trying to get the sale date backdated to a previous year (Sheffield Wednesday) or blatantly inflating the sale price over true market value (Derby). If the intent of the rule is ultimately to make clubs sustainable by preventing the build up of excessive losses over time, then the EFL have failed utterly. More than half the teams in the division currently spend more just in wages than they get through the door in revenue - a terrifying statistic. And now, to circumvent this, a bunch of clubs have now been separated from their grounds, so if the worst happens - the promotion gamble fails, or the owner gets bored or runs out of cash - and they do go into administration, then there is every likelihood the clubs concerned could become homeless.
didn’t somebody have trouble with this last year I found this article https://www.thetimes.co.uk/article/...ting-them-back-to-exploit-ffp-rules-nd332mdzl but can’t read as behind a paywall
Derby “The stadium was on the club’s books for £41m. Following an independent valuation Derby sold it for £80m to a subsidiary company owned by club chairman Mel Morris. It was then leased back for around £40m. The move allowed Derby to post pre-tax profits of £14.6m in its 2017/18 accounts and, crucially, senior executives thought, dodge the league’s profit and sustainability rules. The prior two years the club recorded losses of £7.9m and £14.7m.” https://www.accountingweb.co.uk/bus...derby-charged-under-financial-fair-play-rules
Its not the income on the sale of the ground but the profit. Both Derby and Sheff W owned their grounds and it was valued in the accounts at £x-they sold it to a connected party for twice £x so the club made a profit which reduced their cumulative losses to within the allowed figures. As Cptn M points out Sheff W even backdated the sale to a previous financial year. As Derby pointed out in their defence if some mug is willing to lend the connected party money to help buy the ground for more than its worth thats their business. As to the culpability of the valuers, well each ground is different so very few comparables. Generally an asset is worth what someone is willing to pay for it-much like a players value. Once you set financial rules most firms affected look at ways of beating the system and selling a ground is much like selling a player in terms of accounting for it in a set of accounts.
Let’s be honest though. Who is more at risk? Clubs where the owner artificially puts money in by buying the ground. Or us with the Pozzos and large 3rd party debts and bridging loans against future income (and indeed where those loans are secured against the ground and player assets anyway).
FFP seems to result in fairly large points deduction (I think Sheffield Wed are starting on -12 points) which could be the difference between promotion and staying in the championship or championship to league one. Although their FFP charge seems to be slightly different I think at one point 4 or 5 teams in the championship were facing possible points loss , I think there was even talk about the championship not being able to be decided on the final day due to appeals ( which is probably why sheff got a points reduction next year rather than this year)
That’s a fair point and you’re right, we aren’t safer in that respect. My complaint with the stadium transactions is more that sales of fixed assets like stadiums are clearly exceptional, one-off deals that bear no resemblance to a club’s underlying profitability, and so to allow their inclusion for the purposes of assessing FFP is a nonsense.
absolutely true , however I guess you can’t keep doing it, so it’s a very temporary fix to a bigger underlying problem Wonder how the value of an average ground compares to a teams star player , not sure what VR is worth is it more or less than Sarr (which is insane to be even thinking about)
It worth noting the EFL, like the PL, is run by its member clubs and so they essentially write the rules. If enough of them think including stadium sale income in FFP calculations is how it should work that’s what will happen. Or rather, if there’s no appetite to outlaw it things won’t change.
That is great and all, but our owners don't have the funds to lose hundreds of millions of £ anyway. We need to at least approach breaking even, or at least produce manageable losses, regardless of ffp files.
Their lack of funds doesn’t stop the Pozzo’s borrowing and securing funds against the ground, the players and future TV cashflow as demonstrated in the accounts. We can still fail FFP.
I guess if you remove football it’s a bit like stocks and shares , buy a player low sell high , borrow 10m to buy a player sell for 20m , pay of 10m+ interest net 8m profit. I also guess with interest rates so low, why risk your own money leverage the company as far as you can , let’s also be honest £80m to £100m loan sounds horrific to us, but to pay it off all you would have to do is sell , Sarr , Doucs, Gerry and Pereya and that would still leave us with a functioning championship squad
