LEICESTER POSTS £67M PRE-TAX LOSS

[Golden Fox]

21 minutes ago, hackneyfox said:

I thought it was somewhere between £100-120m?

Yes - you are right: the figure wasn't in the accounts: I realised I had that number a bit wrong and was hoping nobody would notice. Still a lot of money to be spending on top of those losses though... 

[filbertway]

I'd assumed the majority was us paying back the 90 odd million loan that we took out against out TV money?

[gerblod]

13 hours ago, Golden Fox said:

So basically, King Power are bankrolling the club.

So, its been said before, but we are very lucky to have the owners we do, and the money they are spending on us, (even if the source of this money is a monopoly that would be an illegal business model in the UK!) - but these accounts show that we are utterly dependent on them now & if they walked away or if King Power were to fail, we would be in administration and back in League One in a heartbeat (and I haven't even tried to look at a set of King Power accounts).

This monopoly was the gift, by royal warrant, of Bhumibol Adulyadej in 2009. Bhumibol died in October 2016 - followed by Vichai two years later. Thus the personal link between the monarchy and KP has been lost.

As well as being questionable business practice, it appears to me to be a boon that could just as easily be taken away by Bhumibol's successor, Vajiralongkorn, and awarded to another company.

Plus, Thailand isn't the most stable of countries.

"For most of 2020, Vajiralongkorn has reportedly rented out the alpine Grand Hotel Sonnenbichl in Garmisch-Partenkirchen for himself and his entourage during the COVID-19 pandemic. He remains there during the nationwide protests and amidst a wave of anti-monarchy sentiments in Thailand, sparking controversy in both Thailand and Germany.

If, and it's a big if, modernising influences managed to oust him then Aiyawatt/KP might not be able to rely on their monopoly surviving and would have to compete in the real world. Just a thought.

[Babylon]

4 hours ago, fleckneymike said:

We're not a 'well run club' in the terms most people understand - balancing books, buying low and selling high etc. I'd wager 90% of fans genuinely think we've next to no debt and that we spend what we earn (the same guff people believe about the economy) by selling players. The Maguire 'joke' is a 'joke' because lots of people believe it to be true.

 

Whether we are better or worse than other clubs is up for debate, but we're a million miles away from being sustainable and most likely never will be.

 

The issue, as always, remains that to be where we are requires us (and the majority of other clubs) to spend someone else's money and kid yourselves there is a '5 year plan' and that 'nothing can possibly go wrong'.

 

 

We made a profit four years running before the last two. If the clubs chosen path is investing in talent knowing it allows us to sell them and invest in more players and higher wages, then it’s working and I’d say that’s being well run.

Edited 30 March 2021 by Babylon

[Finn Claw II]

Football is not really a normal business in that it’s a rich persons play thing.

 

KP could sell that club to a different rich owner and probably walk away with all the money they have invested and more.

 

That said there must be some underlying assumptions about what constitutes sustainable.  E.g a Top 10 finish, Europa league every 3 years. £Xm profit on player sales.  I’d like to know that those are.

 

Football players don’t do too bad out of it.

 

 

 

 

[PaulW]

Lot people on here seem to feel they have better business skills than our billionaire owners.

Maybe if Susan Whelan moves on Top will welcome them with open arms, so that he can learn where he's been going wrong.

 

[Golden Fox]

53 minutes ago, PaulW said:

Lot people on here seem to feel they have better business skills than our billionaire owners.

Maybe if Susan Whelan moves on Top will welcome them with open arms, so that he can learn where he's been going wrong.

 

Analysing a business' results is very different from running it. For example, I wouldn't have the stones to put out a press release as full of BS as they have, but it works when you see the coverage!

 

My line of work is for plcs who are far larger and more profitable than Leicester who are far cleverer about press releases as they need to be with investors crawling all over them. There is no place to hide when you are listed and your results will get picked apart. The true stakeholders for LCFC are KP, the family and the banks, who will form their view from a wider source, much of it non-public data, including forecasts and business plans, so the focus is not on the actual accounts and associated press release, so they can take some liberties with them. 

 

So on the one hand, I probably do have skills and experience that could help, but on the other hand, I'm not stupid enough to work for a company with £186m net liabilities, so no thank you! 

 

P.S. I would like to think I could have a go at making money from a business if it was a Monpoly though!

[sacreblueits442]

1 hour ago, Golden Fox said:

Analysing a business' results is very different from running it. For example, I wouldn't have the stones to put out a press release as full of BS as they have, but it works when you see the coverage!

 

My line of work is for plcs who are far larger and more profitable than Leicester who are far cleverer about press releases as they need to be with investors crawling all over them. There is no place to hide when you are listed and your results will get picked apart. The true stakeholders for LCFC are KP, the family and the banks, who will form their view from a wider source, much of it non-public data, including forecasts and business plans, so the focus is not on the actual accounts and associated press release, so they can take some liberties with them. 

 

So on the one hand, I probably do have skills and experience that could help, but on the other hand, I'm not stupid enough to work for a company with £186m net liabilities, so no thank you! 

 

P.S. I would like to think I could have a go at making money from a business if it was a Monpoly though!

...probably there is a five year plan which sees us in a positive position down the line!!!

We are not investing in infrastructure every year.

[Ric Flair]

3 hours ago, Golden Fox said:

Analysing a business' results is very different from running it. For example, I wouldn't have the stones to put out a press release as full of BS as they have, but it works when you see the coverage!

 

My line of work is for plcs who are far larger and more profitable than Leicester who are far cleverer about press releases as they need to be with investors crawling all over them. There is no place to hide when you are listed and your results will get picked apart. The true stakeholders for LCFC are KP, the family and the banks, who will form their view from a wider source, much of it non-public data, including forecasts and business plans, so the focus is not on the actual accounts and associated press release, so they can take some liberties with them. 

 

So on the one hand, I probably do have skills and experience that could help, but on the other hand, I'm not stupid enough to work for a company with £186m net liabilities, so no thank you! 

 

P.S. I would like to think I could have a go at making money from a business if it was a Monpoly though!

There's an argument that if a club as ambitious as ours is making a profit each year then they aren't as ambitious as they are perceived to be. What's the point of turning a profit as a football club?

[Foxxed]

5 minutes ago, Ric Flair said:

There's an argument that if a club as ambitious as ours is making a profit each year then they aren't as ambitious as they are perceived to be. What's the point of turning a profit as a football club?

I think you’re talking to an accountant Ric...

[Ric Flair]

18 minutes ago, Foxxed said:

I think you’re talking to an accountant Ric...

Hahaha I'm also one mate, there's absolutely no point turning a profit as a football club of our size for footballing reasons if its to the detriment of progression on the pitch. Any owners who buy a club to make money aren't shown in a positive light, the game is warped but it also demands success which comes at a huge cost. Thankfully clubs are bought by grotesquely rich men and women who want to feel the rush of success in the sport and will pay what it takes given the chance.

[Foxxed]

3 minutes ago, Ric Flair said:

Hahaha I'm also one mate, there's absolutely no point turning a profit as a football club of our size for footballing reasons if its to the detriment of progression on the pitch. Any owners who buy a club to make money aren't shown in a positive light, the game is warped but it also demands success which comes at a huge cost. Thankfully clubs are bought by grotesquely rich men and women who want to feel the rush of success in the sport and will pay what it takes given the chance.

Does this mean you expect Top to own the club because he loves football and he's got the money to spare and it's good advertising? I wouldn't mind that, of course, but I find it hard to believe Top doesn't care about us breaking even. I'd love us to break even and not be dependent on debts and make Top profit.

[coolhandfox]

52 minutes ago, Foxxed said:

Does this mean you expect Top to own the club because he loves football and he's got the money to spare and it's good advertising? I wouldn't mind that, of course, but I find it hard to believe Top doesn't care about us breaking even. I'd love us to break even and not be dependent on debts and make Top profit.

Do you think people like Abramovich, Sheikh Mansour bought football clubs to make money? 

 

The majority of football club owners don't buy them to make money, there are 100s of easier ways to make money.

 

It's about kudos 

[Foxxed]

15 minutes ago, coolhandfox said:

Do you think people like Abramovich, Sheikh Mansour bought football clubs to make money? 

 

The majority of football club owners don't buy them to make money, there are 100s of easier ways to make money.

 

It's about kudos 

Yeah I get this. I want the Thais to own the club because they're excellent at it. I don't want to the club to be dependent on debts that come from a monopoly, a monopoly in an often politically unpredictable country. I want the club to be sustainable, not a benefactor away from administration.

[st albans fox]

7 hours ago, coolhandfox said:

Do you think people like Abramovich, Sheikh Mansour bought football clubs to make money? 

 

The majority of football club owners don't buy them to make money, there are 100s of easier ways to make money.

 

It's about kudos 

And this is where the yanks come in ......... they are in it for the money and not the kudos/enjoyment  .....hence the problems with the ‘euro league ‘

Edited 31 March 2021 by st albans fox

[Ric Flair]

7 hours ago, Foxxed said:

Yeah I get this. I want the Thais to own the club because they're excellent at it. I don't want to the club to be dependent on debts that come from a monopoly, a monopoly in an often politically unpredictable country. I want the club to be sustainable, not a benefactor away from administration.

Prior to the last 2 years we managed to turn a profit due at first to the lag between promotion and a low wage bill and the increase in transfers and wages. Then winning the league and the CL exploits added huge plusses to our P&L. But unless we are going to win titles and/or qualify for Europe whilst only paying our players £50-60k a week and never rewarding success with better terms then we aren't going to be turning much of a profit. Not when you throw in a new training ground, plans for a stadium expansion and a pandemic.

 

The only way for us to push it to the limit in ambition and not rack up huge losses is a mix of increasing commercial revenue and sponsorship, continue our blueprint of buying young players who will increase in value and tactically selling those who can be replaced and whom want to leave for large fees and finally continually progress on the pitch and challenge for a top 6 spot EVERY season.

 

We are doing a pretty good job of all of the above right now bar the increase in commercial revenue, however I'd argue the owners don't seem that worried about that part otherwise they may well have cashed I on naming rights etc so I'm not overly concerned by the clubs recent accounts as I don't that that's a direct message that they want to prop the club up long term, it's just occurred due to the various factors already highlighted. 

 

The most important thing is we are a club that harbours ambitions and so far seem to back it up, that's all fans can hope and ask for surely?

[jonthefox]

6 minutes ago, Ric Flair said:

Prior to the last 2 years we managed to turn a profit due at first to the lag between promotion and a low wage bill and the increase in transfers and wages. Then winning the league and the CL exploits added huge plusses to our P&L. But unless we are going to win titles and/or qualify for Europe whilst only paying our players £50-60k a week and never rewarding success with better terms then we aren't going to be turning much of a profit. Not when you throw in a new training ground, plans for a stadium expansion and a pandemic.

 

The only way for us to push it to the limit in ambition and not rack up huge losses is a mix of increasing commercial revenue and sponsorship, continue our blueprint of buying young players who will increase in value and tactically selling those who can be replaced and whom want to leave for large fees and finally continually progress on the pitch and challenge for a top 6 spot EVERY season.

 

We are doing a pretty good job of all of the above right now bar the increase in commercial revenue, however I'd argue the owners don't seem that worried about that part otherwise they may well have cashed I on naming rights etc so I'm not overly concerned by the clubs recent accounts as I don't that that's a direct message that they want to prop the club up long term, it's just occurred due to the various factors already highlighted. 

 

The most important thing is we are a club that harbours ambitions and so far seem to back it up, that's all fans can hope and ask for surely?

Surely the development of the stadium is the start of that. I said in another thread that the notion of 8000 extra seats being sold for £20 a go is fanciful. 

[Ric Flair]

48 minutes ago, jonthefox said:

Surely the development of the stadium is the start of that. I said in another thread that the notion of 8000 extra seats being sold for £20 a go is fanciful. 

You'd get more revenue per year commercially from 1 sponsorship deal than the extra match day revenue. That's the stark reality of where football has gone.

[coolhandfox]

1 hour ago, Ric Flair said:

Prior to the last 2 years we managed to turn a profit due at first to the lag between promotion and a low wage bill and the increase in transfers and wages. Then winning the league and the CL exploits added huge plusses to our P&L. But unless we are going to win titles and/or qualify for Europe whilst only paying our players £50-60k a week and never rewarding success with better terms then we aren't going to be turning much of a profit. Not when you throw in a new training ground, plans for a stadium expansion and a pandemic.

 

The only way for us to push it to the limit in ambition and not rack up huge losses is a mix of increasing commercial revenue and sponsorship, continue our blueprint of buying young players who will increase in value and tactically selling those who can be replaced and whom want to leave for large fees and finally continually progress on the pitch and challenge for a top 6 spot EVERY season.

 

We are doing a pretty good job of all of the above right now bar the increase in commercial revenue, however I'd argue the owners don't seem that worried about that part otherwise they may well have cashed I on naming rights etc so I'm not overly concerned by the clubs recent accounts as I don't that that's a direct message that they want to prop the club up long term, it's just occurred due to the various factors already highlighted. 

 

The most important thing is we are a club that harbours ambitions and so far seem to back it up, that's all fans can hope and ask for surely?

As O'Neill was reported to have said to Barrie Pierpoint when he was bragging about how may shirts he had sold, try doing that at a club with a crap team. 

 

Commercial success is linked to having a successful team. 

 

The loss of the last two years are grow pains as we try and close the gap on the top 6, once we close the gap the financial situation well stabilise.  Following promotion to the Premier League, Leicester City delivered four years of profits, amounting to £137m, before the £20m loss in 2019 and 67m 2020.

 

In theory we are 50m up since our extended stay in the PL, I suspect without COVID we would have lost 20m again and be 90m up. 

 

Man City had the same problem trying to established themselves as a top club, trying to catch up 30 years PL/CL money over night is expensive. 

 

[moore_94]

 

[Muzzy_Larsson]

11 hours ago, Ric Flair said:

There's an argument that if a club as ambitious as ours is making a profit each year then they aren't as ambitious as they are perceived to be. What's the point of turning a profit as a football club?

Has boiled my piss for years re: Lawell.

 

The times we have speculated to accumulate and paid Rodgers 80k a week we had turnover in the nine figure range.

 

When we've went for the cheap and useless options like Lennon our turnover has halved.

[mozartfox]

25 minutes ago, moore_94 said:

 

Who are the 1.38%?   

[Golden Fox]

20 hours ago, Babylon said:

We made a profit four years running before the last two.

OK, its a bit sad, but I'm genuinely intrigued by how a company can go from being profitable 4 years in a row to suddenly making a £67m loss, so I've done done more analysis on the last 5 years (the 6th year back when we were in the Championship is a different ballgame altogether):

 

And time for a bit of humble pie: In a deeper dive into the accounts, player transfers are quite misleading: the fees to buy players actually show as amortisation within COS, but the fees we receive go on the face of the P+L as transfers, which is why it looks like we are making a massive profit on them each year - once you match the 2 off against each other, the losses don't look as bad, and the numbers start to make more sense. I've looked at my original post & the headline comment that the business is spending £272m on a turnover of £150m. Taking out transfers, the business is only spending £194m on non-transfers, so adding in the covid deferred income for a turnover of £182m is a very different scenario.

 

 

	2020	2019	2018	2017	2016
"Normalised" turnover *	182,350	178,429	158,881	162,890	128,715
Actual turnover	149,450	178,429	158,881	233,013	128,715
Wages	157,479	149,512	119,013	112,555	80,352
Other costs	36,609	39,291	25,138	34,847	22,625
Transfer writedown (amortisation)	78,273	63,979	48,807	29,701	18,059
Net Transfer income	63,088	58,396	38,330	38,830	10,793
Net transfers	(15,185)	(5,583)	(10,477)	9,129	(7,266)
Book pre-tax & pre-interest profit	(59,823)	(15,957)	4,253	94,740	18,472
"Normalised" pre-tax pre-tfr profit *	(11,738)	(10,374)	14,659	15,488	25,738
Actual pre-tax profit	(59,823)	(15,957)	4,253	94,740	18,472
Current (liabilities)/assets	(186,036)	(65,790)	(31,205)	8,863	166,711
* Figures exclude Champions league turnover of £70.1m in 2017 but add Covid-deferred turnover of £32.9 in 2020

So if you exclude the impact of transfers, the Champions League windfall, but add back in the Covid  money lost from March '20-May '20, we have gone from making a £25m profit in 2016 to a £12m loss in 2020.

 

The root cause of this is wages: turnover has increased pretty much every year from £129m to £182m, while at the same time, wages have increased from £80m to £157m - so wages have increased by £24m more than profit, which is the big driver.

 

So actually, I will take back my previous comment that a year in the Champions League won't return us to profitability or that it would take more than a player sale: £12m underlying loss is not big in the scheme of things: and with the £33m Covid deferral, the £15m net transfers and £7m interest I can see how you get to a £67m loss.

 

2 hours ago, Ric Flair said:

The most important thing is we are a club that harbours ambitions and so far seem to back it up, that's all fans can hope and ask for surely?

Having lived through this before and ended up in administration (plus having mates who support Bury and Darlington), I am very nervous about chasing the dream, and I am very nervous about the trend in net assets/liabilities with a swing of £352m in 5 years, but I do now think this is being done in a much more controlled manner following a deeper dive into the numbers & a re-evaluation of the way the transfers are reported.

 

Therefore, having set out to have a good read through the 2020 accounts, there is a lot more of a story to it, and I think the football club does look to be in pretty good shape considering we are punching our way into the top 6.

 

Edited 31 March 2021 by Golden Fox

[Babylon]

3 minutes ago, Golden Fox said:

OK, its a bit sad, but I'm genuinely intrigued by how a company can go from being profitable 4 years in a row to suddenly making a £67m loss, so I've done dome more analysis on the last 5 years (the 6th year back when we were in the Championship is a different ballgame altogether):

 

And time for a bit of humble pie: In a deeper dive into the accounts, player transfers are quite misleading: the fees to buy players actually show as amortisation within COS, but the fees we receive go on the face of the P+L as transfers, which is why it looks like we are making a massive profit on them each year - once you match the 2 off against each other, the losses don't look as bad, and the numbers start to make more sense. I've looked at my original post & the headline comment that the business is spending £272m on a turnover of £150m. Taking out transfers, the business is only spending £194m on non-transfers, so adding in the covid deferred income for a turnover of £182m is a very different scenario.

 

 

	2020	2019	2018	2017	2016
"Normalised" turnover *	182,350	178,429	158,881	162,890	128,715
Actual turnover	149,450	178,429	158,881	233,013	128,715
Wages	157,479	149,512	119,013	112,555	80,352
Other costs	36,609	39,291	25,138	34,847	22,625
Transfer writedown (amortisation)	78,273	63,979	48,807	29,701	18,059
Net Transfer income	63,088	58,396	38,330	38,830	10,793
Net transfers	(15,185)	(5,583)	(10,477)	9,129	(7,266)
Book pre-tax & pre-interest profit	(59,823)	(15,957)	4,253	94,740	18,472
"Normalised" pre-tax pre-tfr profit *	(11,738)	(10,374)	14,659	15,488	25,738
Actual pre-tax profit	(59,823)	(15,957)	4,253	94,740	18,472
Current (liabilities)/assets	(186,036)	(65,790)	(31,205)	8,863	166,711
* Figures exclude Champions league turnover of £70.1m in 2017 but add Covid-deferred turnover of £32.9 in 2020

So if you exclude the impact of transfers, the Champions League windfall, but add back in the Covid  money lost from March '20-May '20, we have gone from making a £25m profit in 2016 to a £12m loss in 2020.

 

The root cause of this is wages: turnover has increased pretty much every year from £129m to £182m, while at the same time, wages have increased from £80m to £157m - so wages have increased by £24m more than profit, which is the big driver.

 

So actually, I will take back my previous comment that a year in the Champions League won't return us to profitability or that it would take more than a player sale: £12m underlying loss is not big in the scheme of things: and with the £33m Covid deferral, the £15m net transfers and £7m interest I can see how you get to a £67m loss.

 

Having lived through this before and ended up in administration (plus having mates who support Bury and Darlington), I am very nervous about chasing the dream, and I am very nervous about the trend in net assets/liabilities with a swing of £352m in 5 years, but I do now think this is being done in a much more controlled manner following a deeper dive into the numbers & a re-evaluation of the way the transfers are reported.

 

Therefore, having set out to have a good read through the 2020 accounts, there is a lot more of a story to it, and I think the football club does look to be in pretty good shape considering we are punching our way into the top 6.

 

I'm glad you just posted that as it's just saved me a load of time. I was literally sat here looking at the accounts as I just didn't understand the original point of "£272m when turnover is only £150m", it just didn't seem feasible unless the new training grounds toilet paper is made from £50 notes 

[Heymister2015]

Tottenham made £70m extra from concerts/American football and hospitality in the one season they managed to host. So if Leicester could even make £20m extra from those kind of revenue streams as well as being a future World Cup/euro venue they’d quickly make back there short term expenditure