Terraloon

For some years now it has been abundantly clear that LCFC are being run as a major loss making entity. You need look no further than the accounting bottom line to know that spending the amount on wages, on transfer fees on non playing staff could not be paid out of the amount of revenue the club generated. It’s all well and good pointing fingers at others, at the rules and above all the leagues but LCFC has been run by a group of individuals that are akin to kids in a candy store. Of course the rules are flawed but they are what they are . It was so obvious that the “ wins “ that the lawyers achieved were shallow. The written reasons from the appeal panel were clearly not sound the fact the the PL went to arbitration, something they rarely do, should have set alarm bells ringing but no the club ploughed on as opposed to sitting down with the PL to try and agree a settlement. Something that it is far too late in the day to do. Back to those accounts . Without huge transfer profits the losses over the last three years would be over £350 million from a business that over the same period generated less than £600 million. Transfer fees aren’t guaranteed yet year on year they have to a large degree masked the incompetent management of the clubs finances. It was abundantly clear that it all was going to end in tears. For me the clubs latest statement is so flawed as to be a joke. They fail to acknowledge the simple fact that the PLs initial view as to jurisdiction was correct. That’s key because now rather than LCFC being able to claim any mitigation whatsoever the PL and yes ultimately the EFL will go in all guns blazing. The circumstances and lack of co operation will be almost certainly be argued as the aggravating factors leading to any sanction being applied in full! I have been saying for months on here for months that the claimed victories were not and would end up biting the club on the bum and that is now starting to be the case. Theres around a month left of the current accounting year and to stand a chance in terms of posting decent numbers in the accounts I reckon around £70 million needs to be generated in sales and that’s not to make a profit but to keep loses under £50 million which will help but going forward as I posted yesterday the allowances will reduce now year on year, if promotion isn’t achieved and that when the amount that can be spent on transfers and wages has to drop and drop fast.

The accounts confirmed that the KDH transfer was completed in the 23/24 accounting year

Most thought that the 23/24, 22/23 & 21/22 numbers when added together for a 3 year cycle weren’t a problem. Many thought the selling of KDH and the £10 million fee paid by Chelsea were enough to ensure compliance. That clearly isn’t the case. I can only think that the 19/20+20/21 numbers which were positively impacted by way of Covid to such a degree there was a credit which helped significantly when adding in the other years . So much that any loss in 23/24 added to the problem. To be honest LCFC were lucky that the make up of the appeal IC was as it was because if it had been the same as the arbitration panel which was very senior group clearly concluded that the decision of the original IC was correct and the appeal panel weren’t

I should add that perhaps the question as to where, how and when any points deduction be applied has possibly already have been answered in that the PL was only allowed to pursue the investigation and process for 23/24 because the EFL who had started investigation into that year . As I said earlier don’t be at all surprised if this EFL charge is now passed back to the EFL to prosecute. Something I have just read elsewhere ( The Athletic) is that the EFL haven’t given up the idea that they can’t pursue 22/23

It’s important to note there are 3 charges Two of the charges relate to LCFC failing to provide information and assist with matters in general these two are being pursued under PL rules. The third and perhaps key one is being investigated by the PL ( because the arbitration panels concluded says they could) but under EFL rules

The arbitration panel were in effect asked to rule on two issues points 1) Did the PL have jurisdiction for 22/23? If yes did the appeal panel , who ruled no, arrive at their decision by what can best be described as flawed assessment of the evidence . The arbitration panel concluded that the PL did indeed have jurisdiction but the PLs request that the appeal be quashed failed because they, the arbitrators didn’t believe that the appeal panel process and reasoning wasn’t valid just that they got it wrong! 2) The second point for consideration was did the PL have jurisdiction to charge LCFC for 23/24 when of course the club were in the EFL. This is key because they in effect agreed that the PL could indeed do so.

They are . That is it in a nutshell but we need to wait and see what the EFL now does because as sure as eggs are eggs this won’t be the end of the matter. Dont be at all surprised if once LCFC becomes a member of the EFL again they take over the investigation. What we have at the moment is the PL investigation of a PL club under EFL rules but once the share is transferred I believe there is a mechanism in place if both leagues agree to transfer it back to the EFL.

Watch that £105 million number. Come down and if promotion isn’t achieved will I believe be: For the 3 year period 24/25, 23/24 & 22/23 £83 million For the 3 period 25/26, 24/25 & 23/24 £61 million

This is why the arbitration panels views are so important That panel clearly believes that the rules do give jurisdiction to the PL but in relation to 22/3 a charge can’t be laid because the appeal panel’s decision may have been wrong but they way they went about making that decision wasn’t perverse.

The 23/24 numbers were still showing a significant loss of circa £19 million but only were achieved because of a significant amount was received by way of transfer income and of course a £10 million one off in response Maresca. Of course 24/25 saw a uplift in terms of TV monies but for me unless significant transfer income is achieved then without doubt the loss for the current year will be far greater than achieved in 23/24. The simple facts are that as things stand LCFC spend more than in PSR terms it can afford

It’s worth reading both the arbitration panels and indeed the clubs statement as just what was finally ruled The original panel decided that the PL did have jurisdiction to pursue 22/3. That ruling was the subject of an appeal which concluded that the PL didn’t have jurisdiction. The PL had no route to appeal but in their opinion the appeal panel was not correct based on the rules set so set in place an arbitration panel to in effect rule if the final outcome was unreasonable based on rules, evidence and process. One of the three person arbitration panel was chosen by the PL, one by thee club and the third was chosen by the other two participants. This panel didn’t say in their ruling that the PLs claim re jurisdiction for 22/23 was wrong indeed their view was the rules as written did give jurisdiction. The only reason that the appeal panel’s decision wasn’t overturned leading to charges was that the arbitration panel didn’t find that the previous reasoning and process was unreasonable. The clubs statement is to be fair is correct but for me it’s a bit selective in that it’s talking about the arbitration panels inability to overturn not what the final legal view re the rules was. Put another way if the three that made up the arbitration panel had sat on the appeal charges for 22/23 would have followed.

Re three years to 23/24 there was quite a debate around allowance for T ( being 23/24)and in particular how it impacted on clubs gaining promotion . If my memory is correct the quirk within PL rules gave Leicester the £35 million as opposed to how it would be treated when 23/24 became T-1 When I say break even I mean in accord with PSR and all the allowances as opposed to accounting wise. The EFL will be looking at accounts that are in the public domain for 23/24 the draft numbers and projections for 24/25 and if you like cash flow projections for 25/26 . They, the EFL, will only look at facts and not ambition. By that I mean parachute payments will be factored in as will commitments re player contracts etc but not say getting promoted etc One thing I am far from sure about is will a PL panel be tied to EFL tariffs

Possibly although if you look at past IC that have dealt with PSR excesses the starting point is £105 million being a significant allowance so anything north of that number will ,if confirmed, would be a “ guilty” as to how many points who knows although I very much doubt that ther3 would be any mitigation in terms of reduction but certainly the PL will be pointing to failure to submit information etc so their case will be that 5here are aggravating factors. As I posted a week or so ago it’s the 24/25 numbers that will now come under scrutiny and by my reading there is a real possibility that there will be some sort of action namely an embargo on signings simply because under the EFL rules the allowances for 23/24, 24/25 and 25/6 will only be £61 million and without a significant transfer fee in what remains of 24/25 my guess is that £61 million for years 23/24 &24/25 will be exceeded or be very close to that number. So almost certainly the club will have to produce a business plan to show how it will achieve break even and with reducing TV income that is going to be incredibly difficult

Not going to post my calculations but based on the fact we knew that for the three year period ( which included the averaged 19/20+20/21 period) the losses were £19 million over the £105 allowable my numbers are after deductibles 21/22 £62 million 22/23 £58 million 23/24 -£ 13.6 million So £106.4 against £83 all so that’s around £23 million over. Edit As another poster states the allowance isn’t £83 million it’s £105 million so by my calculations the breach will be marginal

It is. Read this part again from their statement . Does it mean they would d have been ok with other supporters being on the pitch at the same time as the players and officials ? His deep frustration at seeing our player lying on the ground in severe pain -something no one with genuine care could ignore - triggered him to go onto the pitch. It was instinctive

I see it’s now being thrown into the debate that following his transfer of shares into trust he was potentially in breach of the law in that he had no right to being on the pitch . The claim he had no more rights than any “ supporter” because that is in all probability as to how UEFa now view him

What struck me was that so many of their players weren’t just running on empty toward the end of the game but how they couldn’t motivate themselves. Let’s be honest LCFC should have been easy meat for them Its no coincidence that their poor run of form is this late in the season . They have qualified for Europe next season as to which tournament that’s up for debate but without a significant uplift in squad numbers and of course quality it will all come crashing down on their heads. They have two games left. Based on league position the WHU game should be at least a draw but on form they will struggle. Then on to Chelsea . If Palace prevail then I see Forest in the Conference which will give them , Forest , a chance to rotate but you are dragging players all over Europe with challenges. For instance Chelsea played in Sweden two weeks ago but due to drug testing and other commitments didn’t get back into the UK till 5.00am on the Friday.

Think this is right.would be a joy to watch

The dilemma as I see it is the club claim that they ceased to be a PL club around 17 days before the end of the accounting year. That claim is for no other reason than to evade the PL regulations . That’s all well and good but if not a PL club under whose jurisdiction if any did LCFC fall under ? The EFL rules may not specify but that’s why the arbitration is critical. It may be that they will only focus on did LC fall under the rules and regulations of PL. But if the question is then if not a PL club I suspect the answer has to be it was under EFL regulations if that is the outcome then that is a whole different ball game. The rules may not be fit for purpose but they a are what they are and some times winning an argument may not lead to the lead ultimate outcome you desire

Mitigation in terms of co operation will only be granted if you in effect go over and above what is expected. The wording throughout the appeal panels ruling avoids stating where jurisdiction lay if the PL doesn’t have it. In reality they ,the IC, don’t state who because they weren’t asked. My reading of the written reasons suggests but it doesn’t state clearly that LCFC became an EFL club . We don’t know what the PL have put before the arbitrators but the best outcome going into 25/26 is that it’s ruled that the PL did. If the EFL ultimately by default get that “ privilege “ that then sort of opens up potentially other issues such as does the allowable PL sum of £35 million apply for the season or revert to the EFL sum of £13 million.?

That’s why the question of jurisdiction is key. If it ruled the PL has jurisdiction for the 3 years up to 23/24 then I can’t see that a points deduction can be imposed in the EFL but probably a points deduction would be suspended till LCFC gain promotion , if however it’s ruled the EFL had jurisdiction and LCFC as we know will be a EFL club then the EFL , will probably issue a charge. The rule is in place for the 22/23 , 23/24 and 24/25 3 year assessment so any charge Leicester receive if proven and sanctioned with a points deduction will follow to the EFL It’s important to realise that for the 3 years 23/24, 24/25 & 25/6 the total losses can only amount to £61 million + allowable. So my best estimates are £125 ish million in total losses For the 3 years 22/23 , 23/24, 24/25 they are restricted to £83 million + allowable so my best estimate is £152 million and we know that in 22/23 &23/24 to date they are running at £108.5 million.

Looking just at the bottom line for the 3 years ending June 24 the losses were £201million (£92.4,£89.7 & £18.9) deduct the £105 ( remember that for clubs promoted T was even though a Championship club increased effectively to£35 million) that’s £96 million over the £105 meaning deductibles of £33 million Pa for academy, woman’s football and depreciation) which is way above the sort of numbers I believe is correct. I work on a round £23 million a year a number I extracted from the PLs claims that in the 3 years to 23 losses were £129.4 million Neither the PL nor the EFL will believe that LCFC have co operated so if points deductions are the “ medicine” then they will argue that there are aggravating factors and little to no justification to mitigate down any sanction in their mind would be appropriate

These changes were inevitable. I said many months ago that my concern would be that the previous “ victories “ would end up biting LCFC on the bun and that I believe in now going to be the case: First let’s look forward to the 25/26implications season. Irrespective of anything else we know that initially in June the EFL will now looking at not just the books for closed years but looking forward to see if the indications are that the £61m allowable for 23/24-24/25 &25/26 will be exceeded . They, the EFL, will look at available numbers and projections going forward to gain some understanding of planning If the numbers point toward that £61 million being exceeded then a business plan will be imposed. Forget the notion that the EFL can force player sales, they can’t, but what they can do is restrict signings , not allow contract extensions etc. There is a minimum squad number that is required but be under no illusions the implementation of a business plan could be catastrophic.You can’t bring in contracted players nor can you just go out and loan. LCFC spend way above its means not just in wages but other areas of expenditure simply can’t be afforded and if the beneficial impact of parachute payments is removed then without massively reducing those costs then it’s a very slippery slope But that’s not where it stops. Based on the EFL statement and depending on the arbitration outcome it’s highly likely that either the PL or the EFL will charge LCFC for the years 21/22- 23/24. If it’s proven that the PL didn’t have jurisdiction then by default the EFL do. Depending on how the 24/25 numbers play out then my concern is that there will be a charge for 22/23, 23/24 and 24/25 . Allowable losses would be £83 million . The first two years saw accounting losses alone of £91 million . Throw into the mix in all this that Man City are still going after the need to include a nominal sum in respect of beneficial owner loans . How that plays out could further muddy the waters. I don’t know how it would have turned out but I do wonder if a better approach would have been to allow the PL to lay charges and use the defence around the PLs rules at a FFP hearing potentially blocking any actions for 21/22- 23/24 but not getting to the charge state means any argument around double jeopardy won’t even be considered. So worse case scenario for me 1) A player embargo as part of an EFL business plan 2) Points deduction for 19/20 - 22/3 Worse case is the PL the arbitration because if it’s the EFL then they will almost certainly be requesting that it’s implemented in 25/26. 3) Points deduction for 22/23-24/25 ( handed down by the PL but implemented in the EFL) before the 25/26 season ends. Meanwhile in good news …….

No one is suggesting that Rudkin has done a top quality job nor can the sort of money being paid currently be sustained If we are looking at costs then yes there has to be a radical re think but the suggestion that you can somehow treat the players in a similar way to how the were “ managed “ 10-20-30 years ago is simply not realistic. A modern scouting and data driven recruitment regime is a significant drain financially and as I keep pointing out the excesses of the last few years are going to significantly impact going forward.The club can’t afford a two year stay in the Championship but almost certainly any benefit that should be gained by way of parachute payments will be mitigated and them some from the storm that brewing FfP wise. Two years ago the relegated squad was favourites for an instant return to the PL . What is vastly different this time is that the club is staring down the barrel because for years it has been spending way above its means . Of course the wages as disclosed are far too high but you can’t just look at the sums in the accounts and gain perspective without looking at the number of staff employed. LCFC have circa 400 staff who aren’t players add to that on a match day employs around 500 casual staff. The club simply can’t spend money it isn’t close to generating there has to be a root and branch review and yes wages of players need to be reduced but look at the accounts money is bleeding everywhere and when you think that equivalent close to 50% of total game receipts generated is spent servicing debt and close to 60% of all other income streams is spent on other operating costs. If the recruitment is focussed on young players plying their trade in say French Div 2 because they are cheap and are signing on the hope they develop then be prepared for either a long stay in the Championship or possibly even further relegation.