Terraloon

Football is an incredibly difficult business to try and budget. I have had limited input into production of a clubs albeit at non league. There the plans weren’t that complex as they only mainly covered one year and very little was factored in re amortisation and likewise transfer income. Irrespective come seasons end the expenditure always was greater than had been budget for. A player suffering a significant injury meaning additional expense bringing in a loan player, sacking a manager, floodlights failure having to pay for police, extra pitch maintenance ( you would be staggered how much it cost just to water one pitch) . In a blink of an eye the planned budget was exceeded by a double digit variance. But to a degree expenditure was the easiest part of the equation. Trying to get close to estimating income was far more complex. Exit from cup competitions was interesting because one group within the directors wanted to budget for cup income matching previous seasons average, others wanted to treat such income as a bonus. To placate supporters expectations the former approach prevailed that led to increasing the player budget . A earlier exit than hoped for and indeed budgeted for all added the variance I mentioned earlier. When it comes to Leicester what shocks me is just how dependent the club is on transfer income. Yes I know that PL broadcast income be it as a PL club or a club in receipt of parachute payments but if you look at the last few years accounts there is always a note about the need for transfer profit, and as we know the need isn’t just for the odd £1m the requirement is to deliver £10s of millions. That dependence may well work in a clubs favour for a decent length of time but at some point it will fail. Football at most levels is a money pit. I personally think clubs have to be protected against themselves . FFP/PSR may, and I say may, have actually helped indeed the number of clubs suffering an insolvency event has dropped massively, but for me the SCMP is a far more logical attempt to control player costs and area of expenditure that most clubs allocate far too high a % of income. Sorry if I offend anyone but people need to stop pointing fingers at the regulations or how they have impacted LC the simple fact is that the vast % of clubs don’t have the issues that the club currently face. Go back to my comments about formulating a budget at non league level . The hope is that LC budgeted for and included potential clauses past year one, two,& three when it came to wages but that was only part of the player costs and fees still have to be honoured . There clearly hasn’t been any realistic approach to management of cash flow indeed the requirement to use facilities offered by that Aussie bank highlighted the poor management of budgets particularly when it came to generating income. Where LC find themselves isn’t of anyone’s else’s making

Not 100% but very close to that % I believe any loss( any sum received below book value) is included. A club can’t unilaterally terminate a players contract without penalty . Almost certainly the FA would , unless there was proof of gross misconduct, would step in.

Very very few rules have sanctions attached to then . Let’s just look at this Southampton case. Will there be evidence to prove on the balance of probability? That’s the first hurdle even before their is talk of a sanction. Will they be other examples that are in earthed during the process ? Will Southampton admit it or deny and then are subsequently the charge is proven ? Would there be any possibility of mitigation ? Most disciplinary matters and indeed criminal cases will see a % of any sanction reduced but when it comes to an offence where the sentence or sanction is fixed in law ( murder for instance ) why would anyone or any entity ever admit guilt ?

The EFL did introduce a rule following the Leeds case. It’s under that new rule that’s Southampton have ben charged. The SCMP rules particularly in EFL 1&2 were/ have been introduced following representations of the clubs.

The starting point in any calculation has to be what number you are going to apply that % against. Put another way what will the football revenue numbers look like. The SCMP system is dynamic and won’t be based on previous years numbers. There has been much debate about that on here the rules on football income are far from straight forward so I suppose you have two scenarios 1) The monies due 26/27 in respect of parachute payments haven’t been drawn down in 25/26 2) The monies due 26/27 in respect of parachute payments have been drawn down in 25/26 and are categorised as forward financing. if 2 applies then I suspect that the in year numbers will show up a problem resulting in a registration embargo. The reduction in year one allowance will impact significantly The next issue will be on what date and for what trading profit ( not fees) any players are sold. There is still time in ye 30/6/26 . It may be crucial to ensure that there possibly is need to get extra income to ensure compliance but again we need to fully understand how transfer income is treated going forward . By that I mean my initial reading it might not be transfer profit as such it may well be when you receive the cash. Finally in terms of revenue how will other income streams such as gather receipts, sponsorship and commercial hold up .in cash terms there will almost certainly be redundancies amongst the administrative staff and many of those will be involved in income generation. Bit of a catch 22 ! It’s pretty obvious that the current players can’t be afforded. If they are in contract then the decision to move on is theirs. They can’t be forced to and some simply will say no. Others won’t be able to get out the door quick enough and there are a third group who the club won’t be able to afford to move on because the offer there will need to be a fee that at least matches their residual value. You then have the dilemma that the head coach and certain others staffs wages are included. That to me suggests it’s likely that the club will have to shop in £ land and will have to go for a young promising coach as opposed to an established name. There are far too many unknowns to really get a handle on what the overall impact will be . We always knew that it was going to be a challenge to comply but I suspect it just got a whole lot more difficult. And all that’s before we even talk about cash flow!

Squad costs include : wages , amortisation, impairment and agent fees.

There is a vote at the EFL today alongside that Championship vote which could significantly change even that %. Owners of EFL 1 clubs want greater alignment with the EFL 2 rules and that would mean the 60% reduced to 50% . I haven’t seen anything re when it would be introduced , that’s if the 75% of clubs agree, or indeed what the first year transitional % , if any would be. edit. It is claimed that the squad reduced % will apply from next season.

Let’s be honest there isn’t likely to be any club offering big bucks to any of them when it comes to wages . Not one of them is likely to get better deals at the level of clubs that will likely be looking at them.

The first step as I say is that a player , to be retained, has to be offered a contract in equal or better terms if that doesn’t happen then the players status changes from being , initially, retained to being a free agent. Of course a contract can be offered on worse terms but what happens is that the players status changes negotiates as a free agent .

The championship and EFL 1& 2 are effectively all run under the EFL. There are different measures within each league but all rules be it from Championship to 1 or vice versa will be easier to enforce than the Championship to Premier League.

The first step for those whose contracts end on 30/6 is the club have the option to offer a new contract which has to be on equal or better terms. Contracts for those not offered terms or those that choose not to take up any offer will still get a few weeks extra pay post 30/6.

The EFL 1 75% squad spend is unlikely to be truly known till some time around Jan 2028 . It’s all well and good pointing to the lack of limits but if say £100 m was forthcoming and indeed £75m added to the playing budget that sort of investment could prove problematic if promotion was achieved and assessed in a later year under PSR. Balancing the numbers in 26/27 won’t be as easy as some think and should promotion not be achieved and the allowable % drops to 60% the challenge becomes even greater. Till the 25/26 Championship numbers are finalised sometime later in 2026 or early 27 then the possibility remains an overspend of £61 million in the three years to 30/6/26 will result in a charge under the championship rules which could result in a points deduction that would be imposed even in EFL1. Let’s hope the numbers aren’t an issue. The 26/27 season will be being assessed as we talk and there will have been all sorts of projections being submitted to target compliance for 25/26 or before accounting year end maybe having to selling a player. Hopefully there isn’t a pressing need to generate transfer cash before 30/6 because any income received in the 25/26 year won’t count toward the 26/27 income. I haven’t fully thought it through, it might be advantageous to sell players in 25/26 but agree a payment plan whereby no cash is actually received til 26/27. That might, and I say might, work massively to the clubs advantage.

I think the fact is that we simply don’t know just how much damage the 25/26 year has done financially . However bad the year will be it will obviously be on top of the accumulated damage of the last few years. We can all guess as to the overall wage bill, as to the lack of cash, etc but what has spooked me is one simple comment from Top. That comment wasn’t a commitment ,it wasn’t a rallying call, for me it was damming in that everything going forward will be based on “hope”. I think it’s a given that in terms of lack of cash, and that’s where we need to focus, the decline has and still is worsening.The question is at what point the whole edifice crumbles. Get to the point of delaying payments to the likes of HMRC and in a blink of an eye the potential of Administration looms ever closer. In such a scenario the players will fall under the classification of football creditors so they will get paid what they are owed because almost certainly any forced sale will generate enough to cover that creditor group. So for PSR, FFP, SCMP or whatever acronym is in fashion an accounting adjustment can move the dial from failure to compliance but when it comes to paying the bills it’s what’s in the bank or if there isn’t enough to match what’s going out it’s how that gap is closed. That’s where I now have more concern than ever and yes back to that one comment that’s what has spooked me. I have long been highlighting the costs that won’t be going away even if wages are cut, players sold or massive cuts are made in the administrative staff numbers the likes of business rates, insurances, utility bills etc are a killer and there is absolutely no way that those expenses are affordable but yet they will still be due. Ok money will be coming in from transfers, from ST sales, from commercial income and the likes but to even see out 26/27 there will need to be a cash injection of note from somewhere that is if the club isn’t sold. So back to the question where is that cash going to come from ? We are all distracted by the concern, no fear, that the 26/27 parachute payment has already been used but 26/27 is in the EFL1 as we all know and irrespective no parachute monies will be added to the coffers come 27/28. I often use the term when it comes to LCFC of “Kicking the can down the road” In terms of cash that can has now hit the wall at roads end. Some seek solace in the fact that Top or KPI will throw more money at the club, well he they or someone is going to have to the question is have they the resources to do so ? Just as much of a concern is have they the will to keep the funds rolling in? I have no doubt that feelers are out looking for a new owner but being in EFL 1 despite having won the PL and fa cup in recent years won’t be putting significant value on the club . So we then ask the question can the owners afford to take what would be a massive loss to get out of the club ? So can’t afford to stay as owners and can’t afford not to be.!

Does anyone believe that had the Blackburn game been a pressure game that LC would have won ? Playing a game when effectively there is absolutely nothing on it isn’t any sort of indicator at all. Without the 6 point deduction going into yesterdays game would have been a must win from a LC perspective and a must not loose from a Blackburns. We have absolutely no idea how more motivated either team would have been nor come to that how more focused WBA would have been. People need to look at what really happened here and not would have happened if ……

Whilst the numbers don’t tell the whole story for me the reality is that had the suits not kicked the can down the road then the shadow that was hanging over the club wouldn’t have ben there in season 25/26. We can talk for hours about the desire or should I say the lack of it from the players . We will scratch our heads as to how the wages being paid didn’t get close to delivering value for money but for me the moment that the club didn’t take on the chin accepting the fact that those excesses would inevitably lead to a sanction at some point for me wasn’t just naive it was arrogant.

You might be right re the parachute payments counting but you also could be wrong. Irrespective in season 26/27 in EFL1 the % allowed is 75% not 60% but as has been posted a couple of times is the fact that if the money advanced from Macquarie is under a forward financing agreement then any sum drawn down can’t be included in that 75%

A couple of points. 1) That statement is circa 10 months old. 2) The latest confirmation statement tells us that £94m £1 shares was issued in the in the year to Nov 25 to KP. 3) Top likewise was issued £30m of £1 shares 2)+3) combined equates to the £124m of debt converted to equity. I would hope that this is a separate agreement but I am far from certain that the £94 m isn’t included in that £116m

It is

I would guess that if the finances were there quite a number of players would , or soon would be in discussions to try and agree to cancel contracts as they say “ by mutual consent” Alas everything it seems to be coming down to is it affordable or will contracted player agree to walk. Let’s just look at Vestergarrd. Is he planning for Leicester to be his last club? What is his domestic situation? Is he married does he have kids are they happy etc etc etc. Domestic circumstances will play massively into what he will want to do. Thats before you even start to think about his finances and options. We know he isn’t a Championship player, his legs have gone ( if he ever had any) his body like all players as they get older particularly those that are lumps are increasingly vulnerable. We have witnessed his demise he will know it better than any of us and the simple fact of the matter is he isn’t going to get a long term contract where even say a two year , no even possibly a three year deal will get what he will in the remaining year at LC. Lastly you have the clubs options. This is where I really struggle to see what the way forward is . I think we all would agree that no one’s going to come in offer a fee. Will he agree to go on loan ? Unlikely. Let’s just suppose he is due £1.5 m for next season. When you add in things like his end of contract payments, the Nic costs etc he is going to cost circa £2 million . We don’t have any current knowledge of the numbers but does any one think Top has £2 million down the back of a sofa? Add to that , and I haven’t done the numbers there is still an element of amortisation to factor in But he is just one player I am sure that there are four, five six ir more the club would want gone but the simple fact is the money ain’t there.particularly when you factor in that he will have to replaced and that will come at a cost. Back for one second to Vestergarrd. I don’t think he will go ! He is a cart horse but cart horses , experienced ones at that may well just be what is needed in EFL1. The trouble is knowing LC they are just as likely , if indeed he is to EFL 1 standard to offer an extension.

When the latest accounts were published there was comment, as required, about transactions with that Aussie bank. Look at the wording of the £50m loan. That suggests to me that in effect every £ of it had been drawn down and with the repayments due way into the future surely suggests it has to include some if not all of the 26/27 parachute payments

Not paying players in accord with their contract to would lead to a registration embargo.The players would be able to claim justification in ripping up their contracts and leaving claiming sporting just cause. Players leaving would have to have their values impaired putting even greater pressure on the numbers. Football creditors , which is how unpaid players are classified would be treated in preference to all other creditors. but more of an issue would be that with out protection of an insolvency event my guess would be that the club would expelled from the EFL.

That is the 64k$ question. In the 24/25 there is mention of two sums post 30/6/25 being drawn down in respect of PL distributions. The only thing we know is what the accounts show us

We discussed this yesterday and whilst I can’t say 100% you are wrong if the arrangement with Macquarie is in fact deemed to be of the type referred to in the guidelines and if any sum of the 26/27 has in fact been drawn from the facility then it is highly likely that sum is indeed discoumted Forward Financing: 1.16.1 Distributions - If Premier League Distributions which are relevant to the Reporting Period (a Parachute Payment for example) have been received by the Club in Cash in a prior Reporting Period as a result of ‘forward financing’’, the amounts received in the earlier period may not be included in the calculation of Relevant Turnover. Guidance: If a Club is relegated from the Premier League at the end of Season; Competes in the Championship is Season 2024/25 but is relegated to League One at the end of that Season; and Forward finances 100% of its Year 1 Parachute Payment from the Premier League and 70% of its Year 2 Parachute Payment, receiving those amounts during Season 2025/26 IT FOLLOWS THAT The Club will only be able to include 30% of the Year 2 Parachute Payment within the calculation for Relevant Turnover for Season 2026/27, its first in League One.

Do you know the biggest worry was when Top didn’t commit to spending he said something about trying.

I pointed out a while ago that a red flag, well one of many red flags, was the sum appearing in the accounts in respect of interest and indeed it is sizeable and will continue to be there as long as there are borrowings of the size and nature we see at LC. There is absolutely no simple answer to the conundrum that is Seagrave. Ok some wet themselves at the project and ambition that it signalled but the reality is that someone in authority should have spent attention to the risks many since relegation from the PL seem obvious