TheUltimateWinner Posted 12 May 2013 Share Posted 12 May 2013 Re-quoting an article from March. http://foxblogger.wordpress.com/2013/03/10/what-leicester-citys-finances-mean-for-nigel-pearsons-future/ There have been a lot of figures to absorb in the last seven days. A record loss of nearly £30m. Wages soaring to nearly £28m. The club’s debt to its Thai owners rising to an estimated £100m. But without more information these numbers are often difficult to put into context. Is the loss that big? Are the wages that high? Is the debt that significant? And what does it all mean for Nigel Pearson? Here are some indicators to help you make up your mind. The above chart shows the club’s headline profit and loss figures since Leicester City were relegated from the Premier League. In that time City have recorded a profit just once. Boosted by parachute payments from the Premier League, the club’s books in 2005/06 looked healthier than they have at any time since. From 2006/07 to 2011/12 the Foxes have posed cumulative losses totalling £78.3m. More than half of that total, £44.9m, has come in the two seasons since the Srivaddhanaprabha family took control. Whilst the club was by no means running a tight ship before King Power arrived, the acceleration in losses is striking. Much of the increased losses have come from higher player wages. Whilst high as a percentage of turnover, salaries did not peak at much more than £15m for seven years. Then in 2011/12 they rose by more than £11m. There have been significant rises before (see 2007/08, Milan Mandaric’s first full season at the helm) but never on this scale. The high salaries and the losses they have generated are being financed through a series of loans, £67.5m from the owners was on the books at the end of 2011/12. A further £15.4m had been injected into the club upto the end of November this season. Whilst it is not clear if this money is a loan – it seems a reasonable assumption. Meanwhile £17.2m was owing on the stadium before King Power bought the debt. As with the loans it seems likely that, in time, the owners will want back the reported £17m which was paid to Teachers to put the stadium in their hands. All that takes the total owing to the King Power Group of companies to around £100m. To put it another way, Leicester’s debt is almost five times bigger than their turnover. There has been talk of some of this debt being turned into equity – something which would significantly boost the club’s balance sheet. But there are no guarantees this will happen. Meanwhile the loans have already accrued nearly £4m in interest. So how can the club stem the losses? One way is to bring more money in. As the chart above shows, turnover is improving. This has been largely due to increased sponsorship deals with King Power, Air Asia and Amazing Thailand. Other revenues though have been broadly flat. Ticket prices rose in many areas on the King Power Stadium at the start of 2011/12, but the club raised £150,000 less in ticket revenue than it had a year earlier. Results like that may cause the club to think again with its season ticket and match day ticket strategy. Retail, one of the more noticeable overhauls at the King Power Stadium, has also seen revenues stay virtually the same. On both counts the club will need to do better as it fights to meet the Championship’s new Financial Fair Play requirements. Meanwhile despite this clubs extensive coverage on Sky Sports this season, the Football League TV deal is with 26 per cent less this year Financial Fair play kicks in with penalties from next season. The first sanctions for finishing 2013/14 with a loss of more than £8m will be applied in January 2015. That could mean a transfer embargo if the Foxes are (heaven forbid) still in the Championship, or a Financial Fair Play Tax if they have been promoted. Just how difficult it will be for Leicester City to comply with the new rules should they fail to get promotion this year is pretty clear. In short, Leicester City will have to cut wages back to near 2009/10 levels to have any hope of meeting the cap, and whilst some big earners have gone, their replacements do not play for free. Nor do the many players who remain at the club having signed contracts during Sven-Goran Eriksson’s time in charge. With the aforementioned £15.4m already injected into the club this season – there does not appear to be the slowdown in spending necessary to comply with the Financial Fair Play limits yet. Financial Fair Play also means loans from related companies are banned from next season. It all leaves the Srivaddhanaprabha family with a choice. Promotion is necessary as soon as possible so that Leicester’s finances can begin to recover, and likewise King Power can begin to recoup their investment. So do they stick with Nigel Pearson and cross their fingers knowing that;a) Leicester’s promotion chances are fading,b) If Leicester do not get promoted the club has a real job on its hands to meet Financial Fair Play,c) To have a hope of meeting FFP they would have to invest around £5m in equity next season – money which they would not get back unless or until the club was sold. Or do they twist? It is unlikely to have gone unnoticed that Milan Mandaric sacked Gary Megson last season with 13 games to go and saw Dave Jones lead his side to automatic promotion with 10 wins and 3 draws. Only a Premier League pot of gold will even begin to bring Leicester City’s finances back towards the black. It might be an easier decision to make when it isn’t your £100m at stake. What we know for sure is the very clear statement made within the club’s accounts. “The directors also monitor the performance of both management and players and have a proven track record of making changes where required.†With this in mind, will we have enough money to change the manager? One things for certain. We need to ship players out, and fast. Thanks to foxblogger for his excellent article. Link to comment Share on other sites More sharing options...
cambridgefox Posted 12 May 2013 Share Posted 12 May 2013 That's not really helping my mood to be honest. Got kicked in the stomach earlier now getting kicked in the balls. Link to comment Share on other sites More sharing options...
MooseBreath Posted 12 May 2013 Share Posted 12 May 2013 Blah blah blah. We've been through all this before. Pearson has already shipped out most of the high earners. The rest will leave this summer. Owners will convert debt to equity. There is no problem financially. Link to comment Share on other sites More sharing options...
Callabinho Posted 12 May 2013 Share Posted 12 May 2013 This is the article I didn't want to have to refer too. Pearson knows what he has to do now. Schmeichel Morgan Nugent Wood Danns Beckford (hopefully gone) Konchesky All on big wages no doubt.....maybe we could get away with keeping most of the side intact, and maybe losing one or two players. But big signings are not going to happen! Link to comment Share on other sites More sharing options...
LJS Posted 12 May 2013 Share Posted 12 May 2013 Blah blah blah. We've been through all this before. Pearson has already shipped out most of the high earners. The rest will leave this summer. Owners will convert debt to equity. There is no problem financially. No he ****ing hasn't. Sending players out on loan is not 'shipping out high earners'. It's a myth. The owners may well convert debt to equity but do you really believe they will never want that back? They have no affinity to this club. We are their play thing and we exist for them to profit from. People need to take their heads out of the sand. Our financial situation is ****ing ludicrous. Christ, how I long for the days when we moaned about Martin George being a tight arsed git. Link to comment Share on other sites More sharing options...
Callabinho Posted 12 May 2013 Share Posted 12 May 2013 Blah blah blah. We've been through all this before. Pearson has already shipped out most of the high earners. The rest will leave this summer. Owners will convert debt to equity. There is no problem financially. How much we have will be irrelevant, how much we can spend without breaching the rules is the worry. Link to comment Share on other sites More sharing options...
Langston Posted 12 May 2013 Share Posted 12 May 2013 I don't think Morgan would be on extortionate moolah. Link to comment Share on other sites More sharing options...
MooseBreath Posted 12 May 2013 Share Posted 12 May 2013 No he ****ing hasn't. Sending players out on loan is not 'shipping out high earners'. It's a myth. The owners may well convert debt to equity but do you really believe they will never want that back? They have no affinity to this club. We are their play thing and we exist for them to profit from. People need to take their heads out of the sand. Our financial situation is ****ing ludicrous. Christ, how I long for the days when we moaned about Martin George being a tight arsed git. Pearson has already shipped out most of the high earners. The rest will leave this summer. Owners can take profits if they want. It's their club. But to make profits we need to be in the prem. You see how our goals are alligned? That's a good thing. Link to comment Share on other sites More sharing options...
whoareyaaa Posted 12 May 2013 Share Posted 12 May 2013 This is the article I didn't want to have to refer too. Pearson knows what he has to do now. Schmeichel Morgan Nugent Wood Wellens Gallagher SSL Danns Beckford (hopefully gone) Konchesky All on big wages no doubt.....maybe we could get away with keeping most of the side intact, and maybe losing one or two players. But big signings are not going to happen! Link to comment Share on other sites More sharing options...
kingfox Posted 12 May 2013 Share Posted 12 May 2013 Don't really get all financial stuff, never been good with that side of maths. But by the looks of it, we need to ship out Beckford, Danns, Konchesky, St Ledger in particular, basically all of Sven's signings, and if that includes Kasper we might have to revert to losing him, just to help our club. We aren't capable of getting big names in this club, that's why Pearson opted to bring young players in, who will be put on lesser wages to help matters. I can see him doing the same again in the summer. Link to comment Share on other sites More sharing options...
Tom17LCFC Posted 12 May 2013 Share Posted 12 May 2013 I didn't think it was possible to feel any worse today... Link to comment Share on other sites More sharing options...
MooseBreath Posted 12 May 2013 Share Posted 12 May 2013 How much we have will be irrelevant, how much we can spend without breaching the rules is the worry. Indeed, although it will be the same for most clubs and as one of the bigger clubs in the championship we should be at a slight advantage. Link to comment Share on other sites More sharing options...
Cropwellfox Posted 12 May 2013 Share Posted 12 May 2013 The teams coming down from the PL from this year and in future will have such am advantage in terms of parachute payments that our history of yo-yoing between the top two divisions could be something we can only dream of getting back to. This has got to be the longest spell out of the top league in our history now. Link to comment Share on other sites More sharing options...
AKCJ Posted 12 May 2013 Share Posted 12 May 2013 Thanks for this thread. I was beginning to cheer up. This has brought my mood right back down. Link to comment Share on other sites More sharing options...
promised land Posted 12 May 2013 Share Posted 12 May 2013 Reading these threads and still Sven and high earners crop up in the same posts. Did he really have total control on who and how much they paid certain players? Surely the owners must've had a line drawn somewhere when making all those signings. Link to comment Share on other sites More sharing options...
Nationwider Posted 12 May 2013 Share Posted 12 May 2013 Surely the owners must've had a line drawn somewhere when making all those signings. Our owners spent their first two years in 'Fantasy Football' mode. It was pure vanity and indulgence hiring SGE so we can't really complain about him; they let Sven play a high-stakes game and lost. Behind the wheel of their King Power-branded monster truck, they look as lost as Venkys, only with better PR. On a different note, I'm amazed that some people have such confidence in our contracted high-earners being moved on in the summer. I'll defer to any decent insider knowledge, but precisely why would Wellens, Gally etc move now when they can continue to get paid a huge wedge whilst remaining in the shop window on loan, ready to move at the end of 2014 (or 2015) for nothing? Link to comment Share on other sites More sharing options...
Grewks Posted 12 May 2013 Share Posted 12 May 2013 This is why we need to sign appropriately during the summer. Players like Tomlin (i know i rate him very highly) should be on our list. Would be cheap, and better than anything else we have in the squad. Link to comment Share on other sites More sharing options...
Tielemans63 Posted 12 May 2013 Share Posted 12 May 2013 The biggest challenge will be getting rid of those high earners. Everyone is assuming that we'll simply clear the decks but who will take the likes of Konch? No Prem clubs that's for sure. Same might be true of SSL when it comes to selling him as opposed to loaning him. Why did you have to start this thread on today of all days?! Link to comment Share on other sites More sharing options...
kylestyle06 Posted 12 May 2013 Share Posted 12 May 2013 **** sake . There's me thinking lets get some decent players in over the summer ... We're ****ed Link to comment Share on other sites More sharing options...
kingfox Posted 12 May 2013 Share Posted 12 May 2013 **** sake . There's me thinking lets get some decent players in over the summer ... We're ****ed League 1 it is Players wise that is, not relegation, well I hope not. Link to comment Share on other sites More sharing options...
ScouseFox Posted 12 May 2013 Share Posted 12 May 2013 There will obviously be loopholes like there are with all these financial rules. The Thais will get round it and we (and everyone else) will carry on spending more than they can. Link to comment Share on other sites More sharing options...
Callabinho Posted 12 May 2013 Share Posted 12 May 2013 There will obviously be loopholes like there are with all these financial rules. The Thais will get round it and we (and everyone else) will carry on spending more than they can. I think you're right. Link to comment Share on other sites More sharing options...
glenelgfox Posted 13 May 2013 Share Posted 13 May 2013 Here's a thought - we need the Thais to go buy a couple of European teams and hopefully (as it appears) the FL don't change the rules that assisted Watford then we can do what they did and strengthen the squad that way? Link to comment Share on other sites More sharing options...
Recommended Posts
Archived
This topic is now archived and is closed to further replies.