Leicester City and PSR – Everything you need to know on EFL dispute, player sales, and what next

[HankMarvin]

24 minutes ago, coolhandfox said:

My numbers are for the 22/23 PL FFP window, people are talking about.

 

Which we can't impact now other than arguing allowable deductibles. 

 

For the Championship P&S for 23/23, I have us around 4-5m over if we have cut wages with relegation clauses to around 50% of the previous wage bill, so find more income, commercial or sell a player, cut cost or argue more allowable deductibles. 

 

Not every contract has a 50% wage reduction.

Percy stated between 35-50%

Maguire said that the club’s revenue is likely to drop by around two-thirds – £70-80m, as opposed to £214m.

 

the wage bill was 180m,

7 players out of contract

plus player sales

 

But additional players brought in.

 

[hackenbacker]

29 minutes ago, Chelmofox said:

Care to explain how contracts are devised in the Australian league (ranked significantly lower than many second or third tier european leagues) bear any resemblance to trying to compete in the Premier League?  It's not that I don't like the concept, but you are competing for the players so you can compete in the biggest league in the world. It's the biggest factor in all of this, and if Leicester start offering contracts on far worse terms why would a player sign for you?

You  need to chill man!!!!

[coolhandfox]

5 minutes ago, HankMarvin said:

Not every contract has a 50% wage reduction.

Percy stated between 35-50%

Maguire said that the club’s revenue is likely to drop by around two-thirds – £70-80m, as opposed to £214m.

 

the wage bill was 180m,

7 players out of contract

plus player sales

 

But additional players brought in.

 

The turnover was 214 m for 21/22, and I suspect it will drop to around 180m for our last season in the PL.

 

Swiss Ramble thinks we or Leeds could be the first Championship Club to break the 100m revenue barrier this season. 

 

The wage bill of 180m was for 21/22; how much of that was a bonus for finishing 5th, qualifying for Europe and winning the FA Cup?

 

I suspect the 22/23 last PL wage bill to be smaller, so we need to worry about getting to 50% of the 22/23 wage bill, not 21/22. 

 

Just moving Kasper on saved around 7m per season. 

 

 

 

[themightyfin]

3 minutes ago, coolhandfox said:

The turnover was 214 m for 21/22, and I suspect it will drop to around 180m for our last season in the PL.

 

Swiss Ramble thinks we or Leeds could be the first Championship Club to break the 100m revenue barrier this season. 

 

The wage bill of 180m was for 21/22; how much of that was a bonus for finishing 5th, qualifying for Europe and winning the FA Cup?

 

I suspect the 22/23 last PL wage bill to be smaller, so we need to worry about getting to 50% of the 22/23 wage bill, not 21/22. 

 

Just moving Kasper on saved around 7m per season. 

 

 

 

We never saved £7 million on Kaspers wages .

 

A week later we go Alex Smithies in that must have cost us at least £300 a week.

[themightyfin]

1 hour ago, davieG said:

Wasn't meant as another discussion just to save people who haven't kept up with the details a chance to see it laid out in a simple way.

Yeah fair enough bud. Just feels all this is diluted between multiple threads and they all conform one thing..... Nobody really knows whats going on and what will eventually happen. All guesswork. 

[MPH]

 I will add... it  makes it a bit clearer now why we have chosen not to sue Everton and Forest 

[HankMarvin]

22 minutes ago, coolhandfox said:

The turnover was 214 m for 21/22, and I suspect it will drop to around 180m for our last season in the PL.

 

Swiss Ramble thinks we or Leeds could be the first Championship Club to break the 100m revenue barrier this season. 

 

The wage bill of 180m was for 21/22; how much of that was a bonus for finishing 5th, qualifying for Europe and winning the FA Cup?

 

I suspect the 22/23 last PL wage bill to be smaller, so we need to worry about getting to 50% of the 22/23 wage bill, not 21/22. 

 

Just moving Kasper on saved around 7m per season. 

 

 

 

“Looking at the most recent accounts from the 2021/22, on the face of it Leicester City have the most to fear, because they had by far the largest operating loss of £83m, the highest wage bill of £182m, the highest wages to turnover ratio of 85%, the highest debt of £346m and the highest interest payable of £19m”

 

 

Turnover will be expected to be 178m if you correlate the broadcasting losses -35m for European football/finishing bottom 3 in line with Southampton and Leeds 

 

even with the reduction in salary and bonuses as you state above the wages to turnover ratio will stay high because of the loss of broadcasting turnover.

 

what about the rise in interest rates?

 

[coolhandfox]

37 minutes ago, themightyfin said:

We never saved £7 million on Kaspers wages .

 

A week later we go Alex Smithies in that must have cost us at least £300 a week.

My point was we offload a higher earner of around 7m per annum.

 

Smithies wages are around 1.5m per annum, so there would have been a net saving of some description. 

[coolhandfox]

17 minutes ago, HankMarvin said:

“Looking at the most recent accounts from the 2021/22, on the face of it Leicester City have the most to fear, because they had by far the largest operating loss of £83m, the highest wage bill of £182m, the highest wages to turnover ratio of 85%, the highest debt of £346m and the highest interest payable of £19m”

Turnover will be expected to be 178m if you correlate the broadcasting losses -35m for European football/finishing bottom 3 in line with Southampton and Leeds 

 

even with the reduction in salary and bonuses as you state above the wages to turnover ratio will stay high because of the loss of broadcasting turnover.

 

what about the rise in interest rates?

Most of the debt was to the owner, Leicester City: The Chairman relieved the club of outstanding debts of £194m to King Power International—BBC Sport. He made a debt-to-equity transfer to KPI to relieve the club of some of its outstanding debts. 

 

This was done to reduce our interest against the accounts; I suspect the only interest we have to worry about is the Macquarie bank loan. 

 

Our wage-to-turnover ratio will have increased from around 85% in the 21/22 accounts to a high of 90-95% in the 22/23 accounts as our turnover dropped. 

 

However, we offset the turnover reduction in the accounts with around 66m pounds profit from the Fofana and Maddison sales. 

 

Edited 8 March by coolhandfox

[HankMarvin]

7 minutes ago, coolhandfox said:

Most of the debt was to the owner, Leicester City: The Chairman relieved the club of outstanding debts of £194m to King Power International—BBC Sport. He made a debt-to-equity transfer to KPI to relieve the club of some of its outstanding debts. 

 

This was done to reduce our interest against the accounts; I suspect the only interest we have to worry about is the Macquarie bank loan. 

 

Our wage-to-turnover ratio will have increased from around 85% in the 21/22 accounts to a high of 90-95% in the 22/23 accounts as our turnover dropped. 

 

However, we offset the turnover reduction in the accounts with around 66m pounds profit from the Fofana and Maddison sales. 

 

Wasn’t Maddison on this years accounts?

 

Net for 22/23 transfers was +32m 

[Babylon]

29 minutes ago, MPH said:

 I will add... it  makes it a bit clearer now why we have chosen not to sue Everton and Forest 

It also kind of gives us a bit of a card to play for mitigating circumstances. 

 

Premier League "Hey naughty Leicester you have lost too much money"

Leicester "You've found clubs guilty of breaking FFP, in a season that directly impacted our profits and losses"

 

How on earth they are going to unpack all of that I don't know. It is, after all mitigating circumstances. Whilst if we took a payoff now, they could, I suppose, argue that we settled that issue. 

 

[Babylon]

6 minutes ago, HankMarvin said:

Wasn’t Maddison on this years accounts?

 

Net for 22/23 transfers was +32m 

Madison would be in the 23/24 accounts. But the PSR for the year before I think... 

 

I dunno, the whole lot is all over the bloody place. 

[coolhandfox]

22 minutes ago, HankMarvin said:

Wasn’t Maddison on this years accounts?

 

Net for 22/23 transfers was +32m 

Maddison counts to 22/23. 

[Globalfox]

4 hours ago, coolhandfox said:

I will stick this in here as I post it in another thread.

 

My view is it's pretty tight. It could go either way. 

 

Using The Swiss Ramble data, as he is far better than me, as a starting point for the previous report period ending in 21/22, we were around 1m under FFP limits (See Table 1) * (19/20 and 20/21 are combined and taken as an average due to COVID so its actual a 4 year period rather than 3)   

 

For the 22/23, the 19/20 accounts drop out, and then I've made some assumptions/guesses about our income and expenditure for 22/23 and I have us going over by 8m (See Table 2)

 

Many variables could nudge us 10m either way, largely down to what we can convince the PL are allowable deductibles.   

 

 

All PL clubs must submit their accounts for the 22/23 season by December 31, 2023. The Premier League has charged Everton and Nottingham Forest with breaching its financial rules based on that submission before they have published their official accounts. 

 

So my question is, why haven't we been charged? Is it because we didn't have to do the December 31, 2023 submission because we are no longer a PL club, or are we ok?

 

The short answer is nobody knows other than the club and the PL. 

 

Cool hand gets it probably the closest estimate from anyone who does not have inside data. The club has always said it’s managing the situation. It will come down to the allowable deductibles as it did with Everton and now Forest. It’s likely to be tight. I think we will scrape through.

 

[leatherhead32]

6 hours ago, davieG said:

If you don't fancy plowing through these 3 topics here's an overview of the situation and what can and might happen.

 

 

 

https://www.leicestermercury.co.uk/sport/football/football-news/leicester-city-psr--everything-9148251?fbclid=IwAR3kW9SM6KLTXSlJ_7u7MmhTlyAmH7kZush_hQMwRVpuFfpoAPgMc59mFJ8

 

Leicester City and PSR – Everything you need to know on EFL dispute, player sales, and what next
All of the details on Leicester City's EFL hearing, the Profit and Sustainability Rules they are at risk of breaching, what might happen next and when there will be clarity

ByJordan Blackwell
11:24, 7 MAR 2024UPDATED12:42, 7 MAR 2024
Leicester City's King Power Stadium

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A dispute between Leicester City and the EFL has been ruled in the club’s favour, but that is far from the end of the matter and hides a bigger story.

Statements posted on Wednesday revealed that a hearing took place in January after City argued it was against the EFL’s own rules for the league to force the club to submit a financial business plan, explaining how they would keep costs down and avoid a breach of Profit and Sustainability Rules (PSR). A panel said City were right and the EFL were wrong.

However, it remains the case that City could break the regulations and be subjected to sanctions. They have until the end of June to get their finances into order. Here’s a rundown of the key matters, what happens next, and when that will happen.

 

Back in November, the EFL’s Club Financial Reporting Unit (CFRU) suspected City were on course to breach PSR for the 23-24 season. As such, they requested a business plan from the club about how they would stay within the guidelines.

A business plan is supposed to outline player sales, wage reductions, and potential uplifts in revenue, all with the intention of balancing the books. If the EFL are not satisfied with a club’s business plan, they can place them under transfer embargo.

However, City argued that it was against the EFL’s rules and the CFRU’s jurisdiction to ask for a business plan at the time they did. They responded in December, and a hearing was called for January.

At the hearing, City argued the EFL’s rules state that City only need to submit future financial information and a projection of their end-of-season accounts by the end of March. As a result, the EFL should not be allowed to make an assessment of their finances until after that date.

The CFRU argued that City’s interpretation was “inappropriately technical” and “inconsistent with the underlying duty on the club to cooperate with the EFL”. They said that if the rules are how City interpret them, it would lead to inequality between clubs.

The CFRU are able to make assessments on 18 Championship clubs from the start of the season based on PSR calculations they submitted the previous March, which in this case is March 2023. But for the six clubs who were either relegated or promoted into the division this season, they wouldn’t be able to make assessments of them until March 2024. They were not Championship clubs in March 2023 and so can’t be judged on finances from those periods.

Ultimately, the independent panel ruled in City’s favour and said the CFRU did not have the power to request a business plan when they did. It was not the case that City exploited a loophole. Merely, they interpreted the rules in a way that the independent panel deemed reasonable. Now, the EFL are seeking to rewrite their rules to avoid other clubs interpreting them the way City have.

 

 

What does all this mean for City?

This dispute is not the big story. The big news is that the EFL believes City are on course to breach PSR rules this season and that could lead to sanctions. This is not something City deny.

In the report of the hearing, it says: “The CFRU submitted that relevant context is that LCFC has not disputed that it is forecast to breach the upper threshold in the 2023-24 season and that this is a serious matter.”

What do City need to do now?

It means they have three months to get their finances in shape so that they do not breach PSR. City’s financial year runs until June 30, so that is their cut-off date.

They are allowed to have lost £83m in the three years up to the end of the 2023-24 season. That includes allowable losses of £35m per each campaign they were in the Premier League, covering 21-22 and 22-23, and then allowable losses of £13m for their year in the Championship, 23-24. So far, the finances for only one of those three seasons have been made public. City made losses of £92.5m in 21-22.

Because of the risks of breaching PSR rules for 23-24 season, City are going to have to take action in the next three months. There are ways to raise finances, such as through FA Cup progression, or through sponsorship deals, which are more likely to come about if City are promoted to the Premier League.

However, possibly the easiest way to raise finances is through selling players. City will have only the first month of the transfer window to do it though, as those sales will need to be completed before June 30.

 

Are there any other problems?

Yes. As things stand, City are actually at risk of two breaches, and they could come with two separate punishments.

Because the finances for the 22-23 season have not yet been made public, it is still not clear if City are within PSR for the three years up to June 2023. Over the previous two campaigns, City lost a combined £120.5m, and so would need to make a profit of more than £20m to be under the allowable losses of £105m.

However, within that, some spending is not factored in, such as that for infrastructure or on the academy. So City’s three-year losses may exceed £105m but they could be within the threshold and avoid punishment.

 

What are the punishments?

As seen with Everton, breaches can be punished with points deductions. The issue for City is what happens if they breach PSR this season but get promoted. Technically, City would have breached EFL rules, but will be a Premier League club, so it will require the two organisations to come together to determine a punishment.

If City have breached PSR for the three years up to the end of 22-23, a points deduction for when they're next in the Premier League is the likely outcome. If they go up this year, that could mean starting next season on minus points.

When will there be clarity?

There will be some clarity at the end of this month when City release their finances for the 22-23 campaign. It will then be known if City have breached PSR for the three years up to June 2023, and it will provide more information as to what they must do to avoid breaching PSR for the three years up to June 2024.

 

What else is there to be considered?

If it’s not messy enough already, there is still the issue with Everton and Nottingham Forest. Both clubs have been charged with breaching PSR for the three years up to the end of the 22-23 season, the campaign in which they finished just above City and avoided relegation.

If City did not breach the rules for that season, and the teams who finished directly above them are found guilty of doing so, they may feel they have a compensation claim. A decision over Everton and Forest is due by May 24 at the latest.

lamens terms at last , thanks for this dg

[Sir Shep]

Apologies as I haven’t studied the threads much but has the club said anything or are they hiding in a cave with their fingers in their ears going la la la la la? 

[dmayne7]

3 hours ago, HankMarvin said:

“Looking at the most recent accounts from the 2021/22, on the face of it Leicester City have the most to fear, because they had by far the largest operating loss of £83m, the highest wage bill of £182m, the highest wages to turnover ratio of 85%, the highest debt of £346m and the highest interest payable of £19m”

 

 

Turnover will be expected to be 178m if you correlate the broadcasting losses -35m for European football/finishing bottom 3 in line with Southampton and Leeds 

 

even with the reduction in salary and bonuses as you state above the wages to turnover ratio will stay high because of the loss of broadcasting turnover.

 

what about the rise in interest rates?

 

Less commercial income than Leeds . That alone is reason for new owners. They haven't hired anyone with basic commercial acumen.

[Daggers]

Well, I for one am looking forward to the inevitable and comprehensive annual post-season review to work out how this has happened, who is responsible, and why they should be allowed to fvck up all over again next season too.
 

[Foxmeister]

Whilst I admit finding Everton's predicament funny initially, it seems trophies, promotion and relegation will be decided in the courts for the foreseeable and that's terrible for the game.

 

To make matters worse, with clubs suing each other, one breach could cause a rapid downward spiral and cause clubs to fold which was the exact reason it was introduced.

[F T Fagos]

39 minutes ago, Daggers said:

Well, I for one am looking forward to the inevitable and comprehensive annual post-season review to work out how this has happened, who is responsible, and why they should be allowed to fvck up all over again next season too.
 

I notice you've left off the horses. Has Rudkin lost them as well?

[Corky]

@coolhandfox has done some great work on this

[Daggers]

3 hours ago, coolhandfox said:

Maddison counts to 22/23. 

You’d have hoped a lad of his age could have learned to count to triple digits at the very least.

[BertFill]

2 minutes ago, Daggers said:

3 hours ago, coolhandfox said:

Maddison counts to 22/23. 

You’d have hoped a lad of his age could have learned to count to triple digits at the very least.

He's one of the brighter footballers. Most of them can barely count their own feet.

[UniFox21]

Football is becoming a real reflection of general life. 

Those few who have all the money and spending on whatever they want. 

Everyone else scrapping by, counting pennies at every turn 

[iancognito]

7 hours ago, MPH said:

 I will add... it  makes it a bit clearer now why we have chosen not to sue Everton and Forest 

Is that official? I heard that now the pts deductions and appeals are confirmed as yet un-named clubs had pushed ahead with their claims. One of the cabal of "football Finance experts" was on the radio the other day saying there would be at least 40-50m in compensation due via the PL. You'd think our lawyers would want to factor that lost revenue into our losses for last season.