Sales to recover losses.

[Bfcboyo]

With Dwight McNeill speculation and now tarks I hope we don't see a mass clearout to cover lost revenue.

https://www.bbc.co.uk/sport/53055537

[bfcmik]

The Chairman said a few weeks ago that the club wouldn't want to but could stand losses up to £50 million. I'm sure that we won't need to cash in on our best players because of a cash crisis.

In fact, I'm pretty sure we will be out there looking to pick up bargains from those clubs who are totally cash-strapped

EDIT: If the players want out then there is little we can do to make them stay beyond a few wise words in their ear, particularly because we depend on that 100% commitment to the team. Hopefully they will be happy to stay.

[Chester Perry]

The Chairman said a few weeks ago that the club wouldn't want to but could stand losses up to £50 million. I'm sure that we won't need to cash in on our best players because of a cash crisis.

In fact, I'm pretty sure we will be out there looking to pick up bargains from those clubs who are totally cash-strapped

EDIT: If the players want out then there is little we can do to make them stay beyond a few wise words in their ear, particularly because we depend on that 100% commitment to the team. Hopefully they will be happy to stay.

I would be keen to hear your reasoning as to your very optimistic prognosis - I wouldn't say I was pessimistic about our situation but I am much more cautious than this

[GodIsADeeJay81]

Going to be a strange transfer window when it reopens.

Even clubs at the top of the pyramid are going to seeking deals and better value for money.

We aren't going to be in the same financial mess as many other clubs, simply because we try to run a tight ship and now is when it will pay off in the main.

This next transfer window will possibly be one of the lowest spending ones for years.

[bfcmik]

I would be keen to hear your reasoning as to your very optimistic prognosis - I wouldn't say I was pessimistic about our situation but I am much more cautious than this

Just going off the Chairman's words several weeks ago. If he thought we wouldn't be n too much trouble should revenues drop by £50 million then the latest estimates of around £15 million cut to the TV rights for this season leaves us reasonably comfortable. Every season every team outside the top 6 see their players touted around by agents, reporters and bloggers most of the latter two groups having no direct knowledge of who is on shortlists, who wants out or who clubs want to move on. Often it is a case of them thinking things like, "Oh yea, Leicester got a shedload of cash for McGuire and haven't spent mega millions replacing him, so which centre-backs out there could they go for with some of those millions?"

[aggi]

I would be keen to hear your reasoning as to your very optimistic prognosis - I wouldn't say I was pessimistic about our situation but I am much more cautious than this

We're going to lose less in gate money and lucrative pre-season games than a lot of clubs

We've pretty much guaranteed another season of premier league football and associated cash.

The TV money repayment is probably only going to drop us to a break even position and in cash terms a fair bit of it is deferred.

We are also debt free with fairly hefty reserves.

On the other hand a lot of clubs lower down the leagues are going to be in serious money problems as they are much more dependent on gates.

[Rowls]

Buyer's market now.

Those cash reserves have gone up in value without the figure changing.

[NewClaret]

Truth is, none of us know, but my reasons for being hopeful are:

We have no debt
Larger (buying) clubs, will be disproportionately impacted by loss of match day revenue, meaning they’re less liquid than normal
We would be daft to sell during an inevitable market downturn - hoping our board realise next summer will provide better selling opportunities.
As posted elsewhere, I’m hopeful the economic impact will be better than feared.

Keeping everything crossed our excellent management to date extends to an acknowledgment that a crisis is a time to invest, not sell.

[Chester Perry]

Just going off the Chairman's words several weeks ago. If he thought we wouldn't be n too much trouble should revenues drop by £50 million then the latest estimates of around £15 million cut to the TV rights for this season leaves us reasonably comfortable. Every season every team outside the top 6 see their players touted around by agents, reporters and bloggers most of the latter two groups having no direct knowledge of who is on shortlists, who wants out or who clubs want to move on. Often it is a case of them thinking things like, "Oh yea, Leicester got a shedload of cash for McGuire and haven't spent mega millions replacing him, so which centre-backs out there could they go for with some of those millions?"

I am sure the Chairman said we wouldn't go under, rather than we wouldn't be in too much trouble - there is a significant difference in the two positions.

TV rights isn't the whole of the loss, there is the lost match day, sponsorship and retail income and also the income from non football events in the various suites at the club, on top of that the club paid it's casual workers for matchday's in March, April and May, never mind the cost of testing, new training protocols and getting the ground ready for the restart. Season ticket payments are likely being held separately in case refunds need to be made. We also have a minimum of £14m to pay in staged transfer payments this month (and hopefully we will receive the same from out debtors, though some of them are in the championship)

The bigger issue is the cash pile we have eaten into, our outgoings are low by Premier League standards - around £7m a month (before you add bonuses), but it is likely to be late July (more than 5 months since we last received any significant income) before we see any influx of cash coming into the club. It would be very easy to imagine £40m or more (before transfers stage payments) paid out by the club in this period.

The club closed it's last credit facility in January (it had been unused for over 2 years, and we became the only club in the league without any credit facility) it is possible (probable?) that we may have to open another to keep paying the bills on time. While July/August should see the cash inwards start to flow again, the base pile will take a few years of restricted spending or the sale of a key player to recover to the £50m+ I was anticipating at season end before the pandemic struck

It is important to remember a significant portion of that cash pile was money believed to be put aside for the long term support of the Academy, irrespective of the division we were in.

Leicester's interest in Tarky is more because Caglar Soyuncu who stepped up to cover for Maguire is himself being targeted by the likes of Man City

[ClaretLoup]

Financially on the plus side it looks like the club are not going to renew contracts for Hart, Lennon, Bardsley and possibly Hendrick. Although the last one it’s unclear as we have heard that at some point he has been offered a deal. According to reports Jeff’s agent is looking for £35 k per week from Italian clubs so probably him and the others are on something similar.

The other conundrum is that useless plank Gibson. Reputedly he is on big bucks and the club need to get shot. If he hadn’t gone back to mummy in Middlesbrough the club might have got a decent fee for him but I can’t see them getting much now for what is essentially a championship player.

So that still leaves a shortfall. So the club can either wing it with what they have got or flog a player. My pessimistic side wonders why we have re-signed Brady if we are not going to sell McNeil. If they did that the club could at least sign more squad replacements

Either way the real big worry is what Dyche wants to do and if it is different from what the club wants to do, what happens?

[TVC15]

We're going to lose less in gate money and lucrative pre-season games than a lot of clubs

We've pretty much guaranteed another season of premier league football and associated cash.

The TV money repayment is probably only going to drop us to a break even position and in cash terms a fair bit of it is deferred.

We are also debt free with fairly hefty reserves.

On the other hand a lot of clubs lower down the leagues are going to be in serious money problems as they are much more dependent on gates.

The reserves will be pretty much wiped out by the reduced TV payments and loss of match day income etc from this season.
The big unknown is the impact for next season and whether we can break even or not with a wage bill of going on for £85m is very much in doubt.

Agree it will impact lots of clubs more than Burnley but we do not have the sources of wealth via our owners that most other clubs do. If our owners are not prepared to subsidise the club it is far from guaranteed that we will get funding from the UK Banks who have pretty much pulled out of the sector in terms of lending....which means we are left with little option than selling players.

I think we are in a really precarious position.

[Mattster]

Say we eat up 40m of the ~50m reserves that would still leave a little bit of liquidity. Given the money we'll save not paying Hart and Lennon and this small reserve I'd really like to see us take the opportunity provided by the cash troubles EFL clubs will have by using statistical analysis and signing up some of the best prospects on the (relative) cheap, loaning most back (or to the level above) for another season of development and reaping the rewards long term either in players progressing to our team or selling on when the market returns to similar levels it was pre-COVID.

[aggi]

The reserves will be pretty much wiped out by the reduced TV payments and loss of match day income etc from this season.
The big unknown is the impact for next season and whether we can break even or not with a wage bill of going on for £85m is very much in doubt.

Agree it will impact lots of clubs more than Burnley but we do not have the sources of wealth via our owners that most other clubs do. If our owners are not prepared to subsidise the club it is far from guaranteed that we will get funding from the UK Banks who have pretty much pulled out of the sector in terms of lending....which means we are left with little option than selling players.

I think we are in a really precarious position.

I don't think that's the case at all. In the last accounts we were showing net assets of ~ £85m and a cash reserve of ~ £40m. So far as I remember the the TV money impact is about £14m and I can't see the matchday income, etc being more than £8m (and likely lower).

So long as the TV money is still coming in, and I've seen nothing saying that isn't the case, then we should be fine next season. Our matchday income, etc is a very small proportion of the club's income

[Chester Perry]

Say we eat up 40m of the ~50m reserves that would still leave a little bit of liquidity. Given the money we'll save not paying Hart and Lennon and this small reserve I'd really like to see us take the opportunity provided by the cash troubles EFL clubs will have by using statistical analysis and signing up some of the best prospects on the (relative) cheap, loaning most back (or to the level above) for another season of development and reaping the rewards long term either in players progressing to our team or selling on when the market returns to similar levels it was pre-COVID.

I said that I had expected our reserves to be around £50m at the end of the season (if there had been no pause/pandemic, meaning in the accounts as of June 30th, which is normally a sweet spot in terms of revenues inwards and cash holdings, I did not say that we had that much in the bank by which to cover our outgoings while we wait for the money to start flowing inwards again. Don't forget that I deliberately omitted bonuses from that out-going cost estimate, that could easily be £20m - £25m at the end of the season depending on how the pot is constructed. (we do not know if it is tv revenue bound)

I would be very surprised given the ebb and flow of money in the game if we did have that much in the middle of March. Even if we did, given the uncertainty surrounding revenues next season, TV, Sponsorship and matchday (the 3 tranches of football income) and the still real possibility of further lockdowns, you would say that any club that spent such small reserves on transfers was reckless, if it was not matched by owner funding (our owners do not have that kind of money.

[randomclaret2]

The difference between finishing say 9th or 16th in purely monetary terms could be vital to the club .Someone mentioned on another thread that the remaining 9 games were meaningless, Im sure the board dont think so..

[TVC15]

I don't think that's the case at all. In the last accounts we were showing net assets of ~ £85m and a cash reserve of ~ £40m. So far as I remember the the TV money impact is about £14m and I can't see the matchday income, etc being more than £8m (and likely lower).

So long as the TV money is still coming in, and I've seen nothing saying that isn't the case, then we should be fine next season. Our matchday income, etc is a very small proportion of the club's income

The estimated cost per club in reduced tv income this year is between £35m and £40m - the reduced matched day income and other things (eg corporate, advertising etc) take it nearer to the £50m Garlick quoted.

Our reserves are around £70m I believe - but it’s not clear what they encompass over and above our cash / investments so not sure how easy it would be to use these if needed.
But even assuming they are if the reduction in our income is even the same as Garlick and other people are saying for this year then we are quickly into needed to find other options....very quickly - eg by the last few months of this year as I doubt very much Garlick would just wait for it all to happen before acting upon it.

Edit - looks like the £35m could be worse case scenario if the season wasn’t going to be finished. Apologies.
Still think it’s a very uncertain time for our finances - as it is for everyone of course. The cash in the bank we have is not over and above our reserves - “cash at bank” is a spot figure taken at the year end position.
We are in a difficult position but no doubt it’s due to a completely unprecedented position that was impossible to plan for even based on the most frugal and risk free business forecast plans.
We are only able to survive this because we have retained some of profits for probably the eventuality of relegation than anything else.

[UnderSeige]

Will we be able to get big money transfer fees for our best players should we sell them? You would think that the fee's would be a good bit lower post-covid. This might also be true for players signing new contracts. The wages are likely to be less than they would have been before covid.

Also, what are the TV payments going to be like next season? It is likely that the season will start behind closed doors unless it is delayed. This could yet prove to be unpopular to many fans and reduce viewing figures. On the other hand, viewing figures could increase since fans will not be able to watch the match at the ground.

[Iloveyoubrady]

I don’t see where the £50 million loss to revenue comes from to be honest. The TV repayments are £340M, £17M per club, and the match day income would only make that up to about £20M. The club shouldn’t have to sell, and should really be looking to buy at good prices this summer.

[TVC15]

Will we be able to get big money transfer fees for our best players should we sell them? You would think that the fee's would be a good bit lower post-covid. This might also be true for players signing new contracts. The wages are likely to be less than they would have been before covid.

Also, what are the TV payments going to be like next season? It is likely that the season will start behind closed doors unless it is delayed. This could yet prove to be unpopular to many fans and reduce viewing figures. On the other hand, viewing figures could increase since fans will not be able to watch the match at the ground.

I think that’s the news everyone is waiting for.
If this season is costing us £35m in reduced TV money as is being reported then that’s likely to be the very minimum next year.
I’m assuming the whole industry is waiting for as long as it can to see where we are going with the virus, a second wave and vaccine etc. Some countries are already talking about allowing crowds back in with a small number already allowing this. Even here there is talk of some fans at the FA
Cup final in August.
With next season unlikely to start till at least September there will be a whole range of scenarios still possible but i think the least likely scenario in the UK is that we will be back to full crowds anytime this year - so that equates to me as extremely likely we will he hit with another £35m to £50m reduction from the TV companies (but that could be quite a bit worse if the busy Christmas schedule etc are also behind closed doors and cup competitions are reduced / cancelled etc)

[aggi]

The estimated cost per club in reduced tv income this year is between £35m and £40m - the reduced matched day income and other things (eg corporate, advertising etc) take it nearer to the £50m Garlick quoted.

Our reserves are around £70m I believe - but it’s not clear what they encompass over and above our cash / investments so not sure how easy it would be to use these if needed.
But even assuming they are if the reduction in our income is even the same as Garlick and other people are saying for this year then we are quickly into needed to find other options....very quickly - eg by the last few months of this year as I doubt very much Garlick would just wait for it all to happen before acting upon it.

Edit - looks like the £35m could be worse case scenario if the season wasn’t going to be finished. Apologies.
Still think it’s a very uncertain time for our finances - as it is for everyone of course. The cash in the bank we have is not over and above our reserves - “cash at bank” is a spot figure taken at the year end position.
We are in a difficult position but no doubt it’s due to a completely unprecedented position that was impossible to plan for even based on the most frugal and risk free business forecast plans.
We are only able to survive this because we have retained some of profits for probably the eventuality of relegation than anything else.

As you say £35m may be worst case (although I'd have thought that would be a bit higher) but I suspect it may be the average figure for the league. Looking specifically at Burnley the numbers drop quite a bit compared to what Spurs for instance will be losing.

The cash is of course the y/e position but it gives a decent feel for what we have. On top of that, a large amount of the TV repayment is spread over the next couple of seasons so it isn't something we need to fund now out of cash reserves.

In addition to the cash reserves the most obvious assets are the players, the ground and training ground, and a fairly hefty chunk of transfer fees owed to us (£15m or so which is matched by what we owe to other clubs). Obviously there are also other liabilities to be set off against that but it still leaves a healthy net assets position.

We may need to reign it in a bit to build up cash reserves in case of relegation but I think that would manifest itself more in restricting signings (Although I suspect there will be some cheap pickings in the Championship downwards) rather than having to sell players

[Mattster]

I said that I had expected our reserves to be around £50m at the end of the season (if there had been no pause/pandemic, meaning in the accounts as of June 30th, which is normally a sweet spot in terms of revenues inwards and cash holdings, I did not say that we had that much in the bank by which to cover our outgoings while we wait for the money to start flowing inwards again. Don't forget that I deliberately omitted bonuses from that out-going cost estimate, that could easily be £20m - £25m at the end of the season depending on how the pot is constructed. (we do not know if it is tv revenue bound)

I would be very surprised given the ebb and flow of money in the game if we did have that much in the middle of March. Even if we did, given the uncertainty surrounding revenues next season, TV, Sponsorship and matchday (the 3 tranches of football income) and the still real possibility of further lockdowns, you would say that any club that spent such small reserves on transfers was reckless, if it was not matched by owner funding (our owners do not have that kind of money.

Don't you think it would be negligent not to take advantage of the lower fees (and probably wages) that should be available in the EFL, which will only be available in the short term? Player fees and wages are bound to bounce back in time and comparative to EFL (and other leagues like the Eredivisie) clubs our income is much more secure over the next season(s).

Clubs with rich owners (pretty much the rest of the EPL) will be able to take advantage of loosened FFP regulations in the aftermath of COVID-19 to invest more money. If we sit still we'll be left behind pretty quickly.

[aggi]

A relevant point from the Swiss Ramble thread here https://twitter.com/SwissRamble/status/ ... 9933929472 is that we appear to have a strong control of our costs compared to other clubs which should help:



Looking at our salaries compared to turnover there is a reasonable scope for us to survive a short-term cut in t/o:



Also a good graphic showing how little of our income comes from gate receipts, etc

[Bfcboyo]

A relevant point from the Swiss Ramble thread here https://twitter.com/SwissRamble/status/ ... 9933929472 is that we appear to have a strong control of our costs compared to other clubs which should help:



Looking at our salaries compared to turnover there is a reasonable scope for us to survive a short-term cut in t/o:



Also a good graphic showing how little of our income comes from gate receipts, etc

And people think our twixes are expensive , Evertons are gold plated. What are Watford doing for this other revenue in blue , drug trafficking or racketeering?

[dsr]

As you say £35m may be worst case (although I'd have thought that would be a bit higher) but I suspect it may be the average figure for the league. Looking specifically at Burnley the numbers drop quite a bit compared to what Spurs for instance will be losing.

They said that if the league does not restart it will cost £700m in TV money; that's £35m per club, though it would almost certainly be pro rata to the usual receipts so we would suffer a good deal less than that.

but as the season looks like it wiull restart and will probably finish, the losses will be half that amount. I reckon that with the lost TV money and lost matchday money we'll be down £15m, say £20m if you want to be pessimistic. After a decent footballing year and small transfer outgoings, that's affordable.

[tiger76]

That Bournemouth figure is stark, 85% wages to turnover ratio, if they go down they'll be in big trouble, kinda blows apart the fairy tale myth of them being a miracle club for competing at this level on a shoestring budget doesn't it.

[Royboyclaret]

Unfortunately the first graph tells only a small part of the story. Overheads at some £15m are dwarfed by Player Amortisation at £38m and of course Wages at £86.6m.

Clear then that a 20% reduction in Income this season as a result of Broadcast rebates will have a dramatic effect on the bottom line of our Profit & Loss account. Income in '18/'19 was £137m.

[dsr]

Unfortunately the first graph tells only a small part of the story. Overheads at some £15m are dwarfed by Player Amortisation at £38m and of course Wages at £86.6m.

Clear then that a 20% reduction in Income this season as a result of Broadcast rebates will have a dramatic effect on the bottom line of our Profit & Loss account. Income in '18/'19 was £137m.

Fortunately player amortisation is a sunk cost. It's an accounting entry but it isn't an expense of this year - that money has already been spent. We don't have to find it.

For the past three years, our operating profit before taking account of player purchases and player sales has been £44m, £35m, £37m. So I think we can take it that we're looking at another £30m before transfers this year until coronavirus struck. So even after coronavirus, looking at it a bit pessimistically, we should still be on £10m or so profit before taking account of player sigings and sales.

And then we know from the accounts that the net cost of signings since last June is £8m. It's specifically stated. So on balance, in terms of cash, we should still break even over the year, which means that our cash pot should still be intact. Or at least not too badly depleted.

[Royboyclaret]

In terms of broadcast income, quite clearly this is the largest portion of our Total Turnover at 83%. For me, the primary concern will now surround overseas rights at some 45% of broadcast revenues. Both the number of broadcasters carrying rights and the amounts they will contribute will drop significantly in the next bidding process (if not during this cycle). The impact of the covid-19 crisis on the global economy with a very severe recession and slow recovery will see some of the weaker broadcasters simply disappear from the market. All of which will result in an enormous retraction in rights spending.

All been debated previously, of course, on the Magic Money Tree thread.

[Royboyclaret]

Fortunately player amortisation is a sunk cost. It's an accounting entry but it isn't an expense of this year - that money has already been spent. We don't have to find it.

For the past three years, our operating profit before taking account of player purchases and player sales has been £44m, £35m, £37m. So I think we can take it that we're looking at another £30m before transfers this year until coronavirus struck. So even after coronavirus, looking at it a bit pessimistically, we should still be on £10m or so profit before taking account of player sigings and sales.

And then we know from the accounts that the net cost of signings since last June is £8m. It's specifically stated. So on balance, in terms of cash, we should still break even over the year, which means that our cash pot should still be intact. Or at least not too badly depleted.

Our Operating Profit/Loss over the three previous financial years were £26m, £14m & (2.1m). Only when Profit on Player Sales during those years of £1m, £31m & £7m were added, the Net Profit adjusted to figures of £27m, £45m & £5m.

[bfcmik]

In terms of broadcast income, quite clearly this is the largest portion of our Total Turnover at 83%. For me, the primary concern will now surround overseas rights at some 45% of broadcast revenues. Both the number of broadcasters carrying rights and the amounts they will contribute will drop significantly in the next bidding process (if not during this cycle). The impact of the covid-19 crisis on the global economy with a very severe recession and slow recovery will see some of the weaker broadcasters simply disappear from the market. All of which will result in an enormous retraction in rights spending.

All been debated previously, of course, on the Magic Money Tree thread.

Our Operating Profit/Loss over the three previous financial years were £26m, £14m & (2.1m). Only when Profit on Player Sales during those years of £1m, £31m & £7m were added, the Net Profit adjusted to figures of £27m, £45m & £5m.

I think everyone agrees it isn't going to be a pretty set of revenue/expenditure/profit figures for this season. I also think you and everyone else agree that we are in much nicer place than many of our 'mini-league' rivals because of our previous profits and, often bemoaned, tight transfer market policies.

[dsr]

Our Operating Profit/Loss over the three previous financial years were £26m, £14m & (2.1m). Only when Profit on Player Sales during those years of £1m, £31m & £7m were added, the Net Profit adjusted to figures of £27m, £45m & £5m.

I am talking about operating profit without player sales or purchases. Capitalising and depreciating the value of players is one of those silly ideas dreamed up by a accountancy theorist who likes accounts to be logical and doesn't much care if they are useful and understandable. (There are a lot of them about in the "upper echelons" of accountancy, all anxious to prove how important their jobs are by finding a new way to do what has been perfectly satisfactory for hundreds of years.)

Be that as it may, it is more useful IMO to produce football club accounts as operating profit without player trading, followed by additions for the value of player sales and deductions for the value of player purchases. And if you do that, you get the figures I came up with.

[Devils_Advocate]

Dont shoot the messenger but I heard a rumour we could be losing four of our top players before next season

Apparently Newcastle are in for Tarks, Chelsea looking at Taylor and Pope with Leicester also interested in Taylor and several teams in for Dwight including Newcastle, Arsenal, Leicester and Wolves.

Dwight is thought to prefer a move back to Man Utd should opportunity arise

[ksrclaret]

Dont shoot the messenger but I heard a rumour we could be losing four of our top players before next season

Apparently Newcastle are in for Tarks, Chelsea looking at Taylor and Pope with Leicester also interested in Taylor and several teams in for Dwight including Newcastle, Arsenal, Leicester and Wolves.

Dwight is thought to prefer a move back to Man Utd should opportunity arise

I heard much the same, from a very reliable source. You won't being hearing who that source is from me, though.

I was also told of some very exciting positive news though which will far outweigh any negative stuff about loss of revenues and players being sold.

Apparently we are going to paint our team bus in claret and blue hoops. Make of that what you will.