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The Championship FFP Thread (Merged)


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Posted (edited)

Birmingham news.

It does. Bellingham the big one, unsure of the final fee. Harding to Rotherham was from academy, pure profit and they sold a Spanish striker for more than they brought him for. Profit and some removed amortised there! Sure some higher earners left this summer too?

They're not much of an FFP concern for me now. Seem to have learnt their lesson, plus signings such as Pedersen, Sunjic, Leko- and as on frees due to age, to some extent maybe, Halilovic and McEcheran all feel like saleable assets for differing reasons.

Etheridge as a Goalkeeper could also retain value ad they have a longer lifespan, depending on fee paid of course. Lots of free transfers means no amortisation in those cases!

Interesting how on time they are with accounts and similar financial reporting obligations though. Even with Covid!

They don't seem to dare drag it our for months over in Hong Kong, see Derby and Sheffield Wednesday as prime examples and the latter are repeat offenders! They always release on time, whether good or bad news.

Edited by Mr Popodopolous
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Posted (edited)

Reading's FFP is surely biting a bit.

Clearly Bayern is a fantastic chance for young players. Think Reading might be walking the tightrope- but you turn down £10m for Moore in summer 2018, you turn down bids for Swift and Meite (IIRC), fairly sure Loader was linked with clubs- not saying you get a huge amount for him but as an academy product that £2m helps. Then again Dale Jennings went to Bayern from Tranmere as a youth?
They surely have saleable assets but the problem is they sell very few! That 2nd Tweet...Ouch, indeed! Again though if you don't look to trade...
 
Actually slightly surprised they aren't- given what we know of 2017/18 and 2018/19 results- on course to breach in the 3 years (4 but 1 + 1 + 2/ 1= New 3 Year) to 2021, in the usual assessments in March.
 
In the past I was possibly crowing a bit about other clubs and their downfall or travails. Still hope certain ones have FFP related travails but survival solvency wise is key, so too is safety of those in clubs. Slightly more moderate me with this 2nd Wave- even Derby. No issue with hoping they lose their EFL appeal, get relegated, laughing at their takeover and non payment of wage debacles- like clockwork- but yeah.
 
Another reason I am not for crowing is that the longer it goes on without signings here, goes on with recalling loanees who were loaned out for a reason, the more I wonder if we are under soft limits/Business Plan related issues. Might only be for this year, come summer with the many out of contract and the rolling on of the FFP cycle it improves but just feels like there are some soft limits in place here...once last seasons accounts released we shall know more!
 
Losing a defender rated at £15m to Bayern on a free though, an extreme example but an example nonetheless of what can happen when you might roll the dice! Maybe they're under a Business Plan that has absolute obligations to stay the right side of the line and they deviate from it, it's a Hard Fail? Perhaps a £30,000 a week offer (just for example) would push them into breach this March?
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Posted (edited)

That Parachute Payment gap- Kinnell. Do think it should be paid as loans, so it helps with solvency and Balance Sheet but has no positive or negative effect on Profit and Loss- therefore keeping clubs in check and pushing the pressure on them to comply with FFP earlier in their stint down here.

Agree @Hxj like that argument a lot with respect to Sheffield Wednesday and their accounts.

Maybe that is the precise or at least the broad nature of the delay to their accounts- could the EFL be pushing back with that very line of argument about inclusion of it in 2018/19 accounts? Be it at Companies House or for FFP purposes.

I'd expect the EFL under Rick Parry to take that stance for sure or explore it- unsure about under Harvey?

Who knows, given the whole debacle that was their (in the timeframe unsuccessful) sale and leaseback of Hillsborough, maybe the auditor isn't happy or they're struggling to justify it to him. It was indicated in the Independent Hearing that nobody- that is Chansiri, the club, the EFL- and maybe even the auditor- took Independent legal advice or adequate Independent legal advice ahead of this transaction. Maybe I misread it but sure the Auditor said to the Panel that he shouldn't have signed it off.

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From August, but a prescient Tweet in the circs for Reading now!

Had they sold one or two, not even all 4 to begin with but one or two at the appropriate time, they might have had headroom to offer Richards a suitable new deal, thereby protecting his value, either for the future or to sell quite big now. Now they may well lose him to Bayern on a free- crazy tbh!

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Took a bit of a look at a few of the relevant clubs here...and one 'so near, yet so far!'

There are some estimates and provisional figures included- but some absolute ones too.

Reading FC. Should we use the Club or the Parent/Group Company? Swiss Ramble suggested excludable costs- total cost of academy, infrastructure etc- came to £6m per season.

Reading FC.

2017/18- LOSS- £20,952,868

2018-19- LOSS- £30,115,218

£51,068,086

Assume £12m in allowable costs- and a profit in 2016/17 and they're fine but surely heading for trouble...

LOSS in 2017/18 also includes a PROFIT of £6,518,222 on Sale and Leaseback of Madejski Stadium and £8,171, 464 in 2018/19- this seemed to be the Training Ground or former training ground- both of these Related Party Transactions as well as a frankly disgraceful £3m loan fee for Aluko! That £20,952,868 LOSS replaces the 2016/17 profit in the next 3 year rolling. That loan fee was from the owners Chinese club btw.

Renhe Sports Management Limited.

2017/18- LOSS- £29,893,815

2018/19- LOSS- £11,753,640

£41,647,275

I am assuming the same allowable costs of £12m.

LOSS in 2018/19 includes a PROFIT of £29,928,818. This encompassed the resale of the Madejski Stadium to the Chinese company, the aforementioned Training facilities, some land around the stadium and the aforementioned £3m for Aluko- so that's £32m in offset losses.

No profit in 2017/18 as it was Renhe who 'purchased' it...very suspect goings on. They made a profit in 2016/17 but the new bit of the cycle is 2017/18 and the huge loss. Obviously parent company purchasing would only leave the profit in the company underneath- which one you choose for FFP assessment doesn't matter, some of the losses are huge. Especially the underlying losses once exceptionals are stripped out.

Only saving grace to some extent perhaps is the bit that says:

Loss for the financial year is attributable to- and this is the combined total ie over 2 years:

  • Owners of the Parent Company- £37,855,167
  • Non-controlling Interests- £3,792,108.

Not entirely sure how it works but it's huge losses all the same- would we exclude Non-controlling Interests?

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Posted (edited)

 Derby- some of these are factual and some of these are club projected figures!

THIS indicates a surge in amortisation.  A surge into 2019/20. Projected. This was in April and May 2019 remember.

Quote

Can you please explain the variances in Player related amortisation charges from £6.5m in 2017/18 down to £4.6m in 2018/19 up to £25.1m in 2019/20? As part of this, please explain how the charge reduces from £3.3m in the 6 months to December 2018 down to £1.2m in the 6 months to June 2019?

Oof. A surge of £20.5m in 2019/20! Or not far off £20m from the 2017/18 season.

Quote

v) Events leading up to the sale of Pride Park

66) In early 2018 Mr Morris began to consider how increased revenue might be generated from Pride Park. He concluded that there could be significant financial benefit to be derived from developing Pride Park into a multi-use, covered stadium, and began to explore the availability of funding for such a project. However, potential funders were reluctant to consider investing in such a project while Pride Park was owned by the Club; they were only prepared to consider investing if Pride Park was ‘extracted’ from the Club, and developed as a stand-alone venture.

67) At around the same time, in spring 2018, the Club provided financial information to the EFL in accordance with the P&S Rules (‘the Club’s P&S Information’) for the 36 month reporting period to 30 June 2018. The Club’s P&S Appendix 1 Form, provided as part of the Club’s P&S Information, recorded

a) A loss before tax for T-2 (year to 30 June 2016) of £14,725,00015 with Adjusted Earnings Before Tax of (-£9,019,000)

b) A loss before tax for T-1 (year to 30 June 2017) of £7,873,00016 with Adjusted Earnings Before Tax of (-£4,686,000)

c) A forecast loss before tax for T (year to 30 June 2018) of £27,445,000 with Adjusted Earnings Before Tax of (-£23,970,000)

68) The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £50,043,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was thus (-£37,675,000). That aggregate figure for Adjusted Earnings Before Tax was in excess of the LLT and very close to the ULT.

69) On 12 April 2018 the EFL wrote to the Club raising various queries about the Club’s P&S Information. The Club responded on 25 April 2018, enclosing a revised P&S Appendix 1 Form That revised P&S Appendix 1 Form recorded

a) A loss before tax for T-2 (year to 30 June 2016) of £14,725,000 with Adjusted Earnings Before Tax of (-£15,271,000)

b) A loss before tax for T-1 (year to 30 June 2017) of £7,873,000 with Adjusted Earnings Before Tax of (-£4,686,000)

c) A forecast loss before tax for T (year to 30 June 2018) of £27,445,000 with Adjusted Earnings Before Tax of (-£23,970,000)

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus still £50,043,000, but its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 had become (-£43,927,000). That aggregate figure for Adjusted Earnings Before Tax had thus become a figure in excess of the LLT and the ULT

Quote

81) On 28 June 2018 the Club did indeed sent a further revised P&S Appendix 1 form together with various other P&S Information. That further revised P&S Appendix 1

a) Continued to record a loss before tax for T-2 (year to 30 June 2016) of £14,725,000 with Adjusted Earnings Before Tax of (-£15,271,000)

b) Recorded a loss before tax for T-1 (year to 30 June 2017) of £20,575,000 with Adjusted Earnings Before Tax of (-£13,948,000)

c) Recorded a forecast loss before tax for T (year to 30 June 2018) of £55,724,000, but recorded Adjusted Earnings Before Tax for T of +£6,737,000.

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £91,024,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was thus (-£22,482,000). That aggregate figure for Adjusted Earnings Before Tax was thus in excess of the LLT but below the ULT.

As we can see, some of the figures changed a bit! Assume it started with the club and then changed to the Group- and rightly so!

Change in treatment of an RPT or similar in the 2015/16 accounts too. Although a) makes no sense- can only assume that loss before tax is the club but the consolidated is the Adjusted Earnings before Tax- not the best written! Or the easiest to follow. Allowable costs per season anyway seem to be in the range of £6-7m.

Finally!

Quote

That Appendix

a) Recorded a loss before tax for T-2 (year to 30 June 2016) of £14,725,000 with Adjusted Earnings Before Tax of (-£15,271,000)

b) Recorded a loss before tax for T-1 (year to 30 June 2017) of £20,575,000 with Adjusted Earnings Before Tax of (-£13,948,000)

c) Recorded a forecast loss before tax for T (year to 30 June 2018) of £55,724,000 with Adjusted Earnings Before Tax for T of (-£272,000).

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £91,024,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was thus (-£29,491,000). That aggregate figure for Adjusted Earnings Before Tax was thus in excess of the LLT but below the ULT

Significant overshoot on anticipated losses for 2017/18, their actual consolidated losses that year were- and yes this includes the £39.940,387 profit on Pride Park- ~£1,145,956. Around £41m or thereabouts- Rowett compensation won't have been forecast either- £1,850,000 but that's an extremely high forecast loss! Big overshoot even with the Stadium Sale and Rowett compensation. £10-15m over in fact- forecast loss would have predated both. Would be intrigued to know how that came about. About £12.8m out basically!

Quote

97) On 18 February 2019 the EFL emailed the Club: ‘

Thank you for you’re the additional submissions you have made in relation to the profit on the sale of the Club’s stadium figure that is to be used in the Club’s 2017/18 P&S Calculation.

In summary we accept that the 2017/18 P&S Result can be adjusted to reflect the £81.1m sales price.

As you know we have struggled to gain sufficient evidence to support the licence fees that were used in order to prepare the Profits Method valuation included in the JLL report … However we have gained comfort on the £81.1m sale value from the fact that the independent JLL report performed the DRC valuation (£74.4m) based on a mid-point construction cost per seat of £3,000. If JLL had based their DRC calculation on the high-point construction cost per seat of £3,500 instead of £3,000 the valuation would come out at approximately £86.1m instead of the £74.4m. A valuation of £81.1m would equate to a construction cost per seat of circa £3,290 and therefore comfortably within the range provided by JLL.

From a review of the Club’s 2017/18 P&S Result the amendment to a sales price of £81.1 would result in 2017/18’s (T) adjusted profit being £6.428m (prior to final figures being submitted).

Please let me know if this is consistent with your calculations’.

Quote

99) On 26 February 2019 the Club emailed Mr Karran to ask whether he would be able to ‘talk through a couple of items’ on the Club’s planned P&S Submission. That conversation took place on 27 February 2019, shortly before the Club’s 2019 P&S Submission was due.

100) The Club did not in fact provide its 2019 P&S Submission by the 1 March deadline provided for in the P&S Rules, and on 6 March 2019 the Club was placed under embargo because of that nonprovision.

101) On 29 March 2019 – the date on which the Annual Report and Financial Statements of the Club and its parent for the year ended 30 June 2018 - the Club provided its 2019 P&S Submissions to the EFL. The P&S Appendix 1 form provided with the 2019 Submissions

a) Recorded a loss before tax for T-2 (year to 30 June 2017) of £20,575,000 with Adjusted Earnings Before Tax of (-£13,407,000)

b) Recorded a loss before tax for T-1 (year to 30 June 2018) of £1,146,000 with Adjusted Earnings Before Tax of £7,207,000

c) Recorded a forecast loss before tax for T (year to 30 June 2019) of £38,727,000 with Adjusted Earnings Before Tax for T of (-£31,517,000). The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £60,448,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was (-£37,717,000). That aggregate figure for Adjusted Earnings Before Tax was accordingly in excess of the LLT but below the ULT.

102) The embargo that had been placed on the Club due to non-provision/late provision of the 2019 Submission was lifted. However, an embargo remained in place to reflect the proximity of the aggregate figure for the Club’s Adjusted Earnings Before Tax to the ULT

I am going to assume that they made say £4m from the playoffs- that's revenue, TV money and Gate Receipts to the losing side- and that the following season, they made £4m from Lampard to Chelsea compensation- and now for a very generous assumption, wage bill FALLS by the same amount amortisation rises.

THAT feels like soft embargo territory though, why were they able to splash millions on Bielik and the Rooney- mostly sponsor funded granted- deal! Other clubs have been soft embargoed and under a Business Plan for less?

Wow, that's even worse than I thought if accurate.

Quote

106) Further queries – including what the parties described as ‘the stadium valuation question’ – continued to be addressed in correspondence during April, May and June 2019. All the while the embargo remained in place. On 11 July 2019 the EFL wrote to the Club

a) Acknowledging that, in light of the receipt by the Club of substantial compensation following the departure of its first team manager and staff to Chelsea, the Club’s 3 year aggregate figure for Adjusted Earnings Before Tax was ‘circa £37.1m’

b) Explaining that even though that figure involved a £3.1m ‘sensitivity in relation to stadium rent for the 2018/19 season that the EFL and Club are still in ongoing discussions over’, even with that sensitivity the Club’s forecast result fell within the ULT

https://www.efl.com/siteassets/image/202021/general-news-images/efl-v-derby-county--decision.pdf

Despite the Lampard compensation, and the Rowett compensation and reaching the Playoff final, they still were not far off failing! I was sure the Lampard compensation was in 2019/20 however.

Sounds like their FFP loss for 2018/19- by which I mean that season in isolation- was in the region of £30-31m! I'm assuming that's not quite right and am still factoring in the Playoff final £3-4m and Lampard compensation £3-4m the next year. To lose that much, yet gain so much- cannot be right. Lampard compensation in small instalment in 2018/19 and the remainder- ie the bulk- in 2019/20?

If that was the case though, then they clearly undershot on their losses for 2018/19 as they overshot for 2017/18- they can't have anticipated the playoff final and Lampard compensation in March though?

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Posted (edited)

Interesting Tweet too- surely it's not a restrictive financial plan imposed by Mel Morris. Local journo...

If it's them agreeing to an EFL one- or should that be agreeing hahaha. the following Tweet hoping it's a competitive one...whistling in the wind!

Presumably such a plan is to ensure they stay the right side of the FFP tightrope! Ha! That £7m profit is to fall off the books- ie the Pride Park sale and leaseback- after this year, to be replaced by whatever the final 2018/19 loss was- when it's the 2017/18, 2018/19 and then averaged 2019/20 + 2020/21...new cycle might be 2018/19, 2019/20 + 2020/21 and 2021/22.

EFL would not give one crap about competitiveness, especially under Parry and with that successful defence- albeit amortisation charge subject to appeal.

Wonder if the extension of Butterfield, Blackman and Johnson in the final month of the accounts materially affected the amortisation- could it have kicked the can down the road to some extent into 2019/20?

Maybe halves the remainder for 2018/19 but pushes that into 2019/20? Dunno.

Lampard compensation- you can't include it twice! Similarly, the amortisation still needs accounting for in full- if reduced in 2018/19, then more in 2019/20 surely. Doesn't matter how you split it basically.

Am not suggesting it was included twice btw, just confused as to which season it appears in! Or would appear in as and when accounts finally appear.

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Posted (edited)

Didn't know this, good news if true!

My interpretation of the financial plan was irrespective of amortisation methods, they will have been on financial FFP related targets.

Eg "Your losses are escalating and terrible- you need to cut wages by x, or sell players to the value of y- or- and Good luck in this climate- get significant naming rights at true arms length- in order to bring yourselves into line for FFP assessment". Assume that would mean March though it's unclear how well that bit is or has been enforced. You have to reach this in losses or cost reduction though or face the consequences.

I find two elements of their case quite curious- why the divergence in sales price- the range I guess but the EFL seemed to get diddled under Harvey? £74,4m to £81.1m- and then the rent bit was £4.16m per season, yet because of days used fell to £1.1m per season or so- only way that can be justified is if the commercial revenue is no longer at the club, or failing that the rent goes back up- even if not in cash but for FFP- to that £4.16m per season- cannot have it all ways.

In further Derby news/speculation.

I'd have to re-read again the document but I am sure that the 100 days thing was a dodge too. 365 days per year would be the £4.16m, was for football purposes- this being 100 days per year- yet there was some sketchiness in the reasons as well as to whether that was worked around.

The price is shady anyway IMO but failing that, either:

  1. The commercial revenue by which I mean specifically non football related income, excluded from the club's FFP calculations.
  2. The rent- even if FFP if not reality- goes up by the extra £3m per season or so as was the case originally.

Nothing else feels acceptable.

As far as the amortisation point goes, if they have been made to go back and do it in the straight line method, that could help them moving forward but I wonder how it would adjust their historic results to date. For the worse I expect. Adjustment for the worse would surely push them into breach to 2019, maybe 2018 too but definitely given the tight margins, 2019?

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Posted (edited)

With respect to the rent bits.

Quote

v) Events leading up to the sale of Pride Park

66) In early 2018 Mr Morris began to consider how increased revenue might be generated from Pride Park. He concluded that there could be significant financial benefit to be derived from developing Pride Park into a multi-use, covered stadium, and began to explore the availability of funding for such a project. However, potential funders were reluctant to consider investing in such a project while Pride Park was owned by the Club; they were only prepared to consider investing if Pride Park was ‘extracted’ from the Club, and developed as a stand-alone venture.

Quote

a) JLL assessed the Fair Value of Pride Park on a Profits basis at £81,100,000

b) JLL assessed the Fair Value of Pride Park on a Depreciated Replacement Cost (‘DRC’) basis at £74,400,000, and 

c) JLL assessed the Market Rent of Pride Park on the basis of a sale and leaseback agreement at £4,160,000 per annum.

Seems quite fair to me, rent yield rate wise anyway!

Gets murkier now?

Quote

77) On 26 June 2018 the Club

a) Forwarded to the EFL an email that purported to have been sent to the Club by JLL at 18.01 on 21 June 2018 in which JLL

i) Explained that it (JLL) had ‘calculated a [DRC] of £74.4m’ for Pride Park, based on a cost of £3,000 per seat, based on a total number of 33,455 seats, assuming an economic life of 60 years and based on an underlying land value of £4.1m

ii) Explained that it (JLL) assessed the Fair Value of Pride Park on a Profits basis at £81.1m. We set out below why we say ‘… purported to have been sent to the Club by JLL …

And moreso.

Quote

b) Forwarded 2 calculations that purported to have been attached to JLL’s 18.01 21 June 2018 email setting out ‘JLL’s workings’:

i) The first calculation set out how JLL had come to assess the Fair Value of Pride Park at £81.1m on a Profits basis

ii) The second calculation set out how JLL had come to assess the Fair Value of Pride Park at £74.4m on a DRC basis Again, we set out below why we say ‘… purported to have been attached …’

c) Forwarded an extract from a valuation of Pride Park that JLL had undertaken for the Club in 2013

d) Informed the EFL that as and when it received further information from JLL (including a summary report), it would forward the same to the EFL.

78) On 26 June 2018 the EFL emailed the Club confirming that ‘if the final report is an official signed report by JLL and includes the information in the emails and the calculations then I would have thought this would be reasonable to support a sales price’.

Even more?

Quote

79) On the same day

a) JLL provided a valuation letter to the Club confirming

i) Its assessment of Fair Value on a Profits basis at £81.1m, and

ii) Its assessment of Fair Value on a DRC basis at £74.4m JLL also confirmed a market rent for Pride Park of £4.16m on a sale and leaseback of Pride Park to the Club on reasonable terms

b) The Club provided that valuation letter to the EFL. In its covering email the Club explained that it had concluded that it was intending to use JLL’s market rental valuation as a basis for calculating the annual rent payable by the Club after sale – in particular, annual rent would be £1m per annum on the basis that the Club would have access to Pride Park for approximately 100 days a year and would incur associated running costs.

80) The following day a) The EFL responded ‘The report is fine and I think your comments regarding rental on the face of it are also OK from our perspective’ b) The Club acknowledged that response and confirmed that it would provide a revised P&S submission to the EFL

The EFL should have maybe accepted it, but insisted on a final analysis a) on the Market Rent as per JLL and b) the DRC being the appropriate FFP method- Birmingham's stadium was it seems valued using that, according to some docs on HKSE. It seems sensible for such unique, hard to value buildings!

100 days per year sounds like football and related to football revenue to me.

Now amazingly, they just reneged!

Quote

82) On the same day the Club

a) Entered into a contract to sell Pride Park to Gellaw at a price of £81.1m. The TR1 records that the sale was also completed on 28 June 2018

b) Entered into a leaseback of Pride Park at a rent of £1,139,726 per annum, albeit without there being any restriction on the number of days for which the Club would have access to Pride Park for football purposes

100 days=£1.1m or thereabouts in rent- no restriction fine, but what about the other £3m or so in rent per year!

Like I say, the only acceptable method is that Commercial Income falls away somewhat- ie non football related Commercial Income- for it to all stack up.

Seemed to go against their own valuers viewpoint too! Some of the next bits are incredible too- what's Independent about the 2nd bolded bit of the below!

Quote

83) On 30 June 2018 JLL provided a formal ‘Valuation Advisory’ of Pride Park. That document was reviewed by the Club and on 3 July 2018 the Club provided certain comments and corrections. JLL appears to have accepted those comments and corrections, and later that same day provided its ‘final’ valuation report to the Club (‘the 2018 JLL report’). We return to consider that report in greater detail below – it suffices for the time being to say that JLL

a) Continued to value Pride Park on a Profits basis at £81.1m

b) Continued to value Pride Park on a DRC basis at £74.4m

c) Continued to assess the market rent of Pride Park on the basis of a sale and leaseback agreement at £4.16m

Even if the price is consistent, how the hell can you accept £3m per year dropping off the rent! It's JLL's own Valuation Advisory??

First year rent free also seems questionable in this context- Chansiri and Morris have possibly utilised this.

However, it possibly even gets worse and murkier.

Quote

84) Before we leave the 2018 JLL report we return to the exchanges that took place between JLL and the Club, and the Club and the EFL, in late June 2018:

a) As we have said above, on 26 June 2018 Mr Holt of the Club sent an email to Mr Karran confirming ‘stadium valuations [by JLL] of £81.1m using a profits method and £74.4m using a DRC method’. Mr Holt’s email

i)Began ‘As discussed yesterday, please see the email below from JLL and attached workings’ which were said to confirm such valuation

ii) Set out below his text an email that purported to have been sent by JLL to the Club at 18.01 on 21 June 2018 titled ‘JLL – Pride Park Draft’ and which stated (under the heading ‘Fair value on basis of Depreciated Replacement Cost

(1) ‘Having reviewed evidence we have adopted a cost of £3,000 per seat for Pride Park, based on a total number of 33,435 at the venue’

(2) ‘We have assumed an economic life of 60 years’

(3) ‘In total we have calculated a [DRC] pf £74.4m

iii) Attached inter alia a document titled ‘JLL – Derby County – Pride Park – Valuation Model 1 – 21 June 2018.pdf’ which comprised the calculation by which JLL had arrived at its DRC valuation of £74.4m

b) In the documents disclosed by the Club there was indeed an email sent by JLL to the Club at 18.01 on 21 June 2018, to which a document titled ‘JLL – Derby County – Pride Park – Valuation Model 1 – 21 June 2018.pdf’ was attached. However

i)That email stated (under the heading ‘Fair value on basis of Depreciated Replacement Cost’)

(1) ‘Having reviewed evidence we have adopted a cost of £3,000 per seat for Pride Park, based on a total number of 33,435 at the venue’

(2) ‘We have assumed an economic life of 50 years’ (not 60 years)

(3) ‘In total we have calculated a [DRC] pf £57.8m’ (not £74.4m)

ii) The attachment comprised the calculation by which JLL had arrived at a DRC valuation of £57.8m (not £74.4m). That calculation

(1) Used a cost per seat of £3,000

(2) Used a capacity of 33,455 39

(3) Assumed economic life for the stadium of 50 years, giving an adjusted remaining economic life of 28 years

(4) Assessed depreciation at 44% and functional obsolescence at 5%

c) In the Club’s disclosure there was a further email sent by JLL to the Club at 15.17 on 25 June 2018, to which a document titled ‘JLL – Derby County – Pride Park Valuation Model – Cost v2 – 25 June 2018.pdf’ was attached:

i)The email (in response to a query from Mr Holt at the Club ‘How are you getting on with the revised DRC workings? Is it possible these could be sent across ahead of my 4.30pm meeting’) read ‘… as discussed, we are comfortable revising this as discussed this morning. See attached

ii) The attachment comprised the calculation by which JLL had arrived at a DRC valuation of £74.4m. That calculation

(1) Still used a cost per seat of £3,000

(2) Still used a capacity of 33,455

(3) Assumed an economic life for the stadium of 60 years, applied a maintenance adjustment of a further 5 years ‘due to good cap-ex’, and so assumed an adjusted remaining economic life of 43 years

(4) Assessed depreciation at 28.3% and functional obsolescence at 5%

85) Without hearing from Mr Holt it is impossible to be certain exactly

a) How the ‘JLL email’ sent to the EFL on 26 June 2018 came to be sent as it was, or

b) How the attachment sent to the EFL on 26 June 2018 came to be labelled as it was.

The strong suspicion is however that

(1) the wording of/figures in JLL’s 21 June 2018 email to the Club was changed by Mr Holt before he forwarded the same to the EFL,

(2) the attachment to JLL’s 25 June 2018 email was relabelled by Mr Holt to make its nomenclature consistent with the other attachments sent by JLL on 21 June 2018, and

(3) Mr Holt replaced the actual attachment to JLL’s 21 June 2018 email with that ‘renamed’ attachment; it is difficult to conceive of any other sensible explanation.

This bit is gobsmacking- really??

Mr. Holt sounds quite important in this whole debacle- why was he not requested to provide evidence at this Hearing?

He's listed as Head of Finance at Derby- not exactly the Tea lady?

Quote

86) The question then becomes – so what? We consider below whether that conduct has any consequence for any of the Club’s procedural defences. However, that matter aside, our view is that the manipulation described above, if that is what it was, is irrelevant. The Club was perfectly entitled to discuss with JLL, and challenge JLL on, the initial figures that JLL provided on 21 June 2018. JLL was perfectly entitled to reconsider its initial figures in the light of such discussions. That is in all probability what happened, and what caused JLL to provide a revised DRC valuation figure to the Club on 25 June 2018. There is certainly no criticism to be made of JLL for providing that revised figure as it did. While it was unwise of Mr Holt to have manipulated JLL’s emailif that is what he did – it is unlikely in our view that the ‘manipulated email’ actually contained any view that JLL had not by then expressed to the Club, or that the ‘manipulated email’ was in fact misleading. Certainly the ‘manipulated email’ reflected the views set out in the 2018 JLL report.

That's an incredible conclusion to draw!! Really??

Quote

b) About the £1m rental valuation that the Club was purporting to apply – in particular, Mr Karran asked for a ‘numerical reconciliation of how the £4.1m reduces to £1m’.

Which were?

Quote

b) As regards the rental valuation, the Club provided additional information and calculations.

Which were?

This might explain it- and this is where the crucial non footballing commercial revenue kicks in. As I say you can't have it all ways!

Quote

89) At 16.45 Mr Karran acknowledged receipt of the additional information and informed the Club ‘Based on this [the information provided by the Club] I will be asking Shaun [Harvey] to review and sign off the Club’s P&S result in the morning. As a result, the Club’s P&S embargo has now been lifted’. The email concluded: ‘As previously discussed the result is based on the new stadium not operating a material part of the group’s operations and therefore not being consolidated into the P&S Result … I’m aware the Club may wish to review the £74.4m stadium sale price that the EFL has chosen to use for the purposes of the P&S Calculation and increase it to £81.1m for P&S submissions in future years’.

Shouldn't happen! Should not happen- DRC feels the best method, if DRC is £74.4m- putting aside the above increase of about 1/3 ie the £57m initial price then this remains for P&S and does not increase!

Quote

90) We were shown a ‘P&S Summary for Tad Detko, Director of Finance’ dated 3 July 2018

a) That had been prepared by Mr Karran following an initial review by him of the Club’s P&S Information (including his exchanges with the Club on 3 July 2018 above)

b) That was signed as having been ‘reviewed and agreed by Tad Detko’ on 3 July 2018. That Summary recorded

i) ‘Club happy for the EFL to use £74.4 at this stage

ii) ‘Club has provided justification for £1m renal valuation based on days usage. This is not an issue for 2017/18 as no rental has been charged in this period. No further queries raised but clarified with the Club (Todd Holt on call on 3 July 2018) it may be revisited next year

iii) ‘Signed TR1 attached’

iv) ’Final P&S result £(29,491)k’

v) ‘Club has fulfilled the P&S Requirement’

Why would you revisit the extra £6.7m?? Why. What was Shaun Harvey- and tbh his mates Detko and Karran- what were they up to?

Profits method is not so reliable I wouldn't have thought. DRC of at best, £74.4m seems more to me- though subsequent stuff talks about Price Per Seat, midrange, ranges of price etc. 

https://www.efl.com/siteassets/image/202021/general-news-images/efl-v-derby-county--decision.pdf

They did a lot more in-time monitoring and questioning than I gave them credit for a year and a half ago but they came to some bizarre conclusions, the EFL. DRC seems a favoured method, Rent should not drop off by £3m a season, that's two.

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Well that's a shame but it shouldn't make any significant difference with the £39m loss limit?

Sounds like Derby were/are also under some kind of embargo- shouldn't be lifted so quickly IMO.

One of their better posters- G STAR RAM- is he forgetting so quickly the spike in amortisation forecast for 2019/20, the massive Projected losses in 2018/19, the fact sacking Cocu and probably hiring him probably not cheap as chips and the fact that even if wage bill came down, the Stadium Sale and leaseback profit disappears from the calculations after this season.

Quote

Last accounts were June 2018, even without accurate figures to hand, I think its reasonably obvious that we have offloaded some very high earners since then and replaced them with cheaper alternatives. 

Of course there is a difference between owning and leasing something but from a financial point of view it isnt going to be huge.

Obviously we no longer have the security of owning our ground but I dont think the Landlord has lots of options of what to do with the ground other than lease it to a football club.

There's also the small matter of whether the rent is too low for FFP in terms of arms length, fair market value etc- or if not, then whether the club should keep the commercial revenue that is not related to football? Otherwise from a structure POV and whether it counts, worthy of another Investigation potentially?

That said maybe I'm underestimating the wage reduction- some sites suggest that Waghorn wages eg are £7,800 per week? :dunno:

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Still, reading this- think you could make a case to put both Sheffield Wednesday AND Derby County under soft embargo this Transfer window.

Wages issue and no accounts at CH.

Quote

16 Clubs’ Financial Records

16 Clubs’ Financial Records

16.1  All Clubs shall keep their financial records in accordance with the provisions of The Football
Association Rules and The League may arrange for an inspection of all such books.

16.2  Each Club shall submit a copy of its Annual Accounts (as defined in Regulation 16.3 below) to The League, but in any event:

16.2.1  by no later than 1 March following the end of the financial year to which those Annual Accounts relate (in the case of a Championship Club); or

16.2.2  by no later than the date on which the Club is required to file its accounts at Companies House (in case of League One and League Two Clubs).

16.3  For the purposes of this Regulation 16, Annual Accounts means the annual accounts in respect of the Club’s most recent financial year (such accounts to be prepared and audited in accordance with applicable legal and regulatory requirements) together with a copy of the directors’ report for that year and a copy of the auditor’s report (if any) on those accounts.

16.4  If the Club considers it appropriate, or The League so requests, the Annual Accounts required to be submitted in accordance with Regulation 16.2 shall relate to the Group of which the Club is a member.

16.5  Where a Club relies on any statutory and/or regulatory exemptions such that the Annual Accounts are either abbreviated in nature or unaudited the Club shall within 14 days of any request provide to The League such additional information as The League deems appropriate. Any information request will ordinarily be limited to information that would be disclosed if the Club was required to prepare annual accounts under the provisions of Section 396 of the 2006 Act and The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as may be amended or replaced from time to time) other than the requirement to have an audit report prepared.

16.6  The League shall have the powers set out in Regulation 16.7 if:

16.6.1  the Club has failed to submit to The League the Annual Accounts as required by Regulation 16.2;

16.6.2  the Club has failed to submit to The League Annual Accounts for the Group where requested by The League in accordance with Regulation 16.4; and/or

16.6.3  the Club has failed to submit to The League any additional information as required by Regulation 16.5,

to The League’s satisfaction.

16.7  The powers referred to in Regulation 16.6 are:

16.7.1  to require the Club to provide such further information as The League shall determine and for such period as it shall determine; and

16.7.2  subject the Club to a registration embargo such that it shall not be permitted to register any Player with that Club without the prior written consent of The League until such time as the breach identified by Regulation 16.6 has been rectified in its entirety to The League’s satisfaction.

16.8  Regulations 16.1 to 16.4 and Regulations 16.20 to 16.22 inclusive shall apply to all Clubs. Regulations 16.5 to 16.7 inclusive shall not apply to Championship Clubs and the remainder of this Regulation 16 shall apply to Championship Clubs in substitution of Regulations 16.5 to 16.7. To enable The League to apply Regulations 16.21 and 16.22 to all Clubs (as opposed to just Championship Clubs) each reference to ‘Championship Club’ in Regulations 16.16 to 16.20 inclusive shall be deemed to read ‘Club’ for that purpose (but not otherwise).

Should be adequate for at least a soft embargo IMO. Maybe a full one but certainly a soft one. Possible they have submitted to the League but not Companies House or their fans/the public via their sites of course.

Aware Derby WERE under an embargo but this being a 2nd offence ie wages wise, the FFP issue, sadly probably can't do it for this reason but their nonsensical claims about an EFL vendetta against them and Mel Morris, but more realistic grounds include the lack of accounts- seems grounds worth exploring to me. Same for Sheffield Wednesday.

Incidentally, did poor old Macclesfield not get referred to Disciplinary Commissions for wage issues? Refer them both, hopefully. Maybe it needs to hit a certain threshold though, ie number of offences?

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On 08/01/2021 at 19:19, Mr Popodopolous said:

Agree @Hxj like that argument a lot with respect to Sheffield Wednesday and their accounts.

Maybe that is the precise or at least the broad nature of the delay to their accounts- could the EFL be pushing back with that very line of argument about inclusion of it in 2018/19 accounts? Be it at Companies House or for FFP purposes.

I'd expect the EFL under Rick Parry to take that stance for sure or explore it- unsure about under Harvey?

 

I would take the line that these are the submitted accounts for 2018 AP and so they fall within regulation 1.1.3 of the FFP regulations.

Accounts can be restated where there is a material omission or mis-statement in those accounts, materiality is relevant but the stadium transfer is clearly material.

FRS 102 states that an error that needs accounts to be restaed arise as follows: 

‘Omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:

(a) Was available when financial statements for those periods were authorised for issue and

(b) Could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.’

In the SWFC case the auditor clearly decided that the adjustment in respect of the stadium sale should be made and therefore the informatiom was both available and taken into account, it was hardly hidden or not discussed.

All in all that makes it tricky to argue that a prior year adjustment is appropriate, in which case SWFC may well have stuffed themselves.

 

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On 10/01/2021 at 20:25, Hxj said:

I would take the line that these are the submitted accounts for 2018 AP and so they fall within regulation 1.1.3 of the FFP regulations.

Accounts can be restated where there is a material omission or mis-statement in those accounts, materiality is relevant but the stadium transfer is clearly material.

FRS 102 states that an error that needs accounts to be restaed arise as follows: 

‘Omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:

(a) Was available when financial statements for those periods were authorised for issue and

(b) Could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.’

In the SWFC case the auditor clearly decided that the adjustment in respect of the stadium sale should be made and therefore the informatiom was both available and taken into account, it was hardly hidden or not discussed.

All in all that makes it tricky to argue that a prior year adjustment is appropriate, in which case SWFC may well have stuffed themselves.

 

Very well explained, thanks. I'd agree with that! Fans on their forum and even Kieran Maguire though seemed to think it just goes into the next season- but I suppose the club might try to argue that 'If it doesn't move, then we pass FFP to 2018'- definitely think it would be hard for the club to justify though, given the information was as you say available and taken into account- but the auditor did seem to suggest that he shouldn't have approved of the transaction, but would have to read the written reasons again. They might also argue that EFL agreed in principle and even Shaun Harvey telling them to get it done quickly, to appear credible, should be mitigating factors.

Imagine that though, docked 12- then reduced to 6- points and the stadium sale being non-applicable due to their own errors/actions- failings in any case. Would be fantastic!

D

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Now then, was going to look at 'one that got away' before and here it is.

Aston Villa.

As we know, they sold the stadium, got HS2 money and got away and did this in the third and final year of Parachute Payments.

Using best estimates of allowable costs, and losses- in the consolidated (NSWE UK, previously Recon Group) accounts:

2016/17

£14.5m Loss- Allowable costs not unreasonably for a club of their size, seemed to be about £11m. FFP loss about £3m.

2017/18

£36.069m Loss- Allowable costs around £15m for the season- FFP loss about £21,069m?

Seemed to be about £3m in exceptional operating Income- if HS2 that needs looking into further, but maybe it was carpark sale or something? They were in a bit of a state in summer 2018 with FFP the least of their concerns...

2018/19

This is where it gets interesting.

£68.884m Loss- Allowable costs around £13m for the season.

HOWEVER:

INCLUDED in that loss, was:

£30m due to Lerner that wasn't paid by Xia if promotion gained within 3 seasons- presumably that was so Xia could get it cheaper, to cut a deal? :dunno:

£15.808m in Promotion Bonuses- normal enough.

Loss down to £23.076m that's before the allowable costs, so that's around £10m for the season in FFP.

This loss also included about £14.5-15m in Parachute Payments plus £10.598m in Profit on Player Disposal.

We therefore have say £31m in 2 year FFP losses. What happens if Aston Villa had lost? Well, given the losing side is purported to get the gate receipts from Wembley let's add another £3.5m to their Revenue and by the same token, Wyness and Bruce sacked, Purslow comes in, so does Smith- Brentford compensated- let's add that while counted for FFP as non recurring costs that won't do so for next season- say £3.5m again.

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However...the bottom line is that you need to get that FFP loss down in 2019/20 to £8m. The following variables will now kick in...I assume that as said the executive changes knock £3.5m off the recurring cost base but again by the same token, that £3.5m in Gate Receipts won't be replicated when forecasting the following season.

  1. Villa Park- Profit on Disposal- £36.374m.
  2. Exceptional Operating Income in the form of what was presumably HS2- £14.494m.
  3. Parachute Payments down to Zero- £14.5m lopped off.
  4. Player Sales- Well of course this can be replicated and maybe built on but given these things start at zero...? £10.598m.
  5. Amortisation increase on January signings- they signed for combined £9.9m fee according to reports, in January- 4.5 year deals, basic Maths suggests an increase of £1.1m in each full season.

On the Parachute Payments side, I am unsure but if Solidarity Payments replace Parachute Payments the fall may 'only' be £9-10m, the net fall that is.

Your challenge, with Revenue falling by approaching £29m, and Profit on Disposal by £36.374m and £10.598m respectively, is to keep within FFP. The EFL would've had some great fun designing a Business Plan I expect!

Players such as Mings, El Ghazi, Abraham- these 3 in particular, surely would not have returned. I suspect your FFP losses would have been £9.5m in this scenario.

A £60-70m and maybe more, FFP hole- makes Birmingham's Business plan look like chicken feed- EFL would have been loving it I expect! Not sure how wildly expensive loans for Tuanzebe or Hause would have been though, so different matter.

I know I would have been, if in a position of power.

Glad though I am at Derby's travails, I wonder what would have been better- EFL tackling Aston Villa over this hole or Derby being in their current position- the most ideal of all would have been West Brom or Leeds winning the playoffs that year as it turned out though!

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Wow, that's unexpected! I assumed it would roll through any day now, well any day from Sunday onwards.

John Percy- who seems reliable on Derby matters- also corroborates this.

Might also add, seeking a third loan from MSD. Well Pride Park or perhaps the lease on Pride Park is deemed security- and then the Training Ground.

Now, a third eh? In addition, those Gabay loans/charges are also still showing at Companies House on the relevant companies as it goes.

I'd be surprised if MSD charge a low rate of interest, especially in these times- but who knows?

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17 minutes ago, Mr Popodopolous said:

Wow, that's unexpected! I assumed it would roll through any day now, well any day from Sunday onwards.

John Percy- who seems reliable on Derby matters- also corroborates this.

Might also add, seeking a third loan from MSD. Well Pride Park or perhaps the lease on Pride Park is deemed security- and then the Training Ground.

Now, a third eh? In addition, those Gabay loans/charges are also still showing at Companies House on the relevant companies as it goes.

I'd be surprised if MSD charge a low rate of interest, especially in these times- but who knows?

Kieran Maguire report that Southampton's loan from MSD is at 9.14%: https://twitter.com/KieranMaguire/status/1349066890069635072

Perhaps that can be expected to be higher for a Championship club which might be seen as slightly less financially secure without Premier League TV rights (or the security of parachute payments) behind it.

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On 10/01/2021 at 16:09, Mr Popodopolous said:

Well that's a shame but it shouldn't make any significant difference with the £39m loss limit?

Sounds like Derby were/are also under some kind of embargo- shouldn't be lifted so quickly IMO.

One of their better posters- G STAR RAM- is he forgetting so quickly the spike in amortisation forecast for 2019/20, the massive Projected losses in 2018/19, the fact sacking Cocu and probably hiring him probably not cheap as chips and the fact that even if wage bill came down, the Stadium Sale and leaseback profit disappears from the calculations after this season.

There's also the small matter of whether the rent is too low for FFP in terms of arms length, fair market value etc- or if not, then whether the club should keep the commercial revenue that is not related to football? Otherwise from a structure POV and whether it counts, worthy of another Investigation potentially?

That said maybe I'm underestimating the wage reduction- some sites suggest that Waghorn wages eg are £7,800 per week? :dunno:

We're currently under a soft embargo due to not paying the wages. Once paid, the embargo should be lifted.

It appears like Covid has helped us pass P&S for 19/20 and 20/21 due to the 4 year period. I wouldn't bet against P&S losses for the 18/19 and 19/20 seasons to be far off £25m and £36m respectively. I recall the Decision Document stated £29.5m for 18/19, which wouldn't include the playoffs or the Lampard compensation. There's no way we would have stayed within the P&S limits for the 2020 period and 2021 would have been difficult, requiring a lot more academy graduates being sold. With the high earners off the wage bill, I have no concerns about the 2022 period though.

I'll be surprised if Waghorn is outside the £15-20k range. You look at the squad list beyond this season and the only high earner remaining will be Lawrence. Bielik, Jozwiak and Marriott the next highest earners, but unlikely to be on much more than £15k

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7 hours ago, AnotherDerbyFan said:

We're currently under a soft embargo due to not paying the wages. Once paid, the embargo should be lifted.

It appears like Covid has helped us pass P&S for 19/20 and 20/21 due to the 4 year period. I wouldn't bet against P&S losses for the 18/19 and 19/20 seasons to be far off £25m and £36m respectively. I recall the Decision Document stated £29.5m for 18/19, which wouldn't include the playoffs or the Lampard compensation. There's no way we would have stayed within the P&S limits for the 2020 period and 2021 would have been difficult, requiring a lot more academy graduates being sold. With the high earners off the wage bill, I have no concerns about the 2022 period though.

I'll be surprised if Waghorn is outside the £15-20k range. You look at the squad list beyond this season and the only high earner remaining will be Lawrence. Bielik, Jozwiak and Marriott the next highest earners, but unlikely to be on much more than £15k

Yes, sounds about right. My personal view on clubs who do not pay the wages is that a punishment needs to stick- lifting as soon as paid is just weak, weak, weak. I also believe clubs should be soft embargoed for not submitting accounts to Companies House in a timely manner, but unlike the first bit, this bit can be lifted fairly swiftly thereafter. There are two Championship clubs who are well overdue in this respect.

Macclesfield got docked points after all for wages- granted this was longer, non-fulfilment of fixtures but I really think there needs to be stronger, automatic punishments across the board for this kind of thing.

I mean- 4 year period but my reading is this?

  1. 2017-18- Year 1
  2. 2018-19- Year 2
  3. 2019 and 2020-21- Added then halved- Year 3. With Covid losses of course excluded/factored in.

Presumably then, you would get in 2021/22:

  1. 2018-19- Year 1
  2. 2019-20 and 2020-21 Added then halved, with Covid losses of course excluded/factored in. Year 2.
  3. 2021/22- Year 3.

If not, you would get some very bizarre P&S outcomes, with some clubs benefiting unduly and some clubs unable to fully utilise their 2018/19 profits! Not even sure it should have been averaged out plus Covid losses, surely Covid losses alone and the usual process up to 2019/20 would have sufficed.

Going to dive back into the Written Reasons again now, to try and get a handle on P&S losses over a given period- and how it might look moving forward.

Quote

69) On 12 April 2018 the EFL wrote to the Club raising various queries about the Club’s P&S Information. The Club responded on 25 April 2018, enclosing a revised P&S Appendix 1 Form That revised P&S Appendix 1 Form recorded 

a) A loss before tax for T-2 (year to 30 June 2016) of £14,725,000 with Adjusted Earnings Before Tax of (-£15,271,000)

b) A loss before tax for T-1 (year to 30 June 2017) of £7,873,000 with Adjusted Earnings Before Tax of (-£4,686,000)

c) A forecast loss before tax for T (year to 30 June 2018) of £27,445,000 with Adjusted Earnings Before Tax of (-£23,970,000)

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus still £50,043,000, but its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 had become (-£43,927,000). That aggregate figure for Adjusted Earnings Before Tax had thus become a figure in excess of the LLT and the ULT.

At this time, they appeared to have been using the club specific accounts throughout.

However:

Quote

81) On 28 June 2018 the Club did indeed sent a further revised P&S Appendix 1 form together with various other P&S Information. That further revised P&S Appendix 1

a) Continued to record a loss before tax for T-2 (year to 30 June 2016) of £14,725,000 with Adjusted Earnings Before Tax of (-£15,271,000)

b) Recorded a loss before tax for T-1 (year to 30 June 2017) of £20,575,000 with Adjusted Earnings Before Tax of (-£13,948,000)

c) Recorded a forecast loss before tax for T (year to 30 June 2018) of £55,724,000, but recorded Adjusted Earnings Before Tax for T of +£6,737,000.

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £91,024,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was thus (-£22,482,000). That aggregate figure for Adjusted Earnings Before Tax was thus in excess of the LLT but below the ULT.

As we can see, this is in line or more in line with the Consolidated Accounts. Use of this would appear to be the correct approach here. Although the Projected Accounts had quite the overshoot with respect to losses- assuming this was before stadium signed off.

Quote

That Summary recorded

i) ‘Club happy for the EFL to use £74.4 at this stage’

ii) ‘Club has provided justification for £1m renal valuation based on days usage. This is not an issue for 2017/18 as no rental has been charged in this period. No further queries raised but clarified with the Club (Todd Holt on call on 3 July 2018) it may be revisited next year’

iii) ‘Signed TR1 attached’

iv) ’Final P&S result £(29,491)k’

v) ‘Club has fulfilled the P&S Requirement’

Putting aside the valuation debates, I am assuming iv) would be the final 3 year P&S result inclusive of stadium, Rowett compensation and playoff income to June 2018.

Quote

That Appendix

a) Recorded a loss before tax for T-2 (year to 30 June 2016) of £14,725,000 with Adjusted Earnings Before Tax of (-£15,271,000)

b) Recorded a loss before tax for T-1 (year to 30 June 2017) of £20,575,000 with Adjusted Earnings Before Tax of (-£13,948,000)

c) Recorded a forecast loss before tax for T (year to 30 June 2018) of £55,724,000 with Adjusted Earnings Before Tax for T of (-£272,000).

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £91,024,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was thus (-£29,491,000). That aggregate figure for Adjusted Earnings Before Tax was thus in excess of the LLT but below the ULT.

Though I suppose the difference between the agreed price and the final agreed price would improve matters by £6-7m. Seems like £5-6m, maybe £7m at times with respect to allowable costs in a typical season. Rowett compensation wouldn't have been anticipated at time of Projected Accounts?

Quote

From a review of the Club’s 2017/18 P&S Result the amendment to a sales price of £81.1 would result in 2017/18’s (T) adjusted profit being £6.428m (prior to final figures being submitted)

Seems right. An improvement of roughly £6-7m, maybe a bit more.

Quote

100) The Club did not in fact provide its 2019 P&S Submission by the 1 March deadline provided for in the P&S Rules, and on 6 March 2019 the Club was placed under embargo because of that nonprovision.

101) On 29 March 2019 – the date on which the Annual Report and Financial Statements of the Club and its parent for the year ended 30 June 2018 - the Club provided its 2019 P&S Submissions to the EFL. The P&S Appendix 1 form provided with the 2019 Submissions

a) Recorded a loss before tax for T-2 (year to 30 June 2017) of £20,575,000 with Adjusted Earnings Before Tax of (-£13,407,000)

b) Recorded a loss before tax for T-1 (year to 30 June 2018) of £1,146,000 with Adjusted Earnings Before Tax of £7,207,000

c) Recorded a forecast loss before tax for T (year to 30 June 2019) of £38,727,000 with Adjusted Earnings Before Tax for T of (-£31,517,000).

The Club’s actual/forecast aggregated loss before tax for T, T-1 and T-2 was thus £60,448,000 and its actual/forecast Adjusted Earnings Before Tax for T, T-1 and T-2 was (-£37,717,000). That aggregate figure for Adjusted Earnings Before Tax was accordingly in excess of the LLT but below the ULT.

102) The embargo that had been placed on the Club due to non-provision/late provision of the 2019 Submission was lifted. However, an embargo remained in place to reflect the proximity of the aggregate figure for the Club’s Adjusted Earnings Before Tax to the ULT.

I assume they are still using the Parent as the basis for the P&S results. Which again is the right thing because Sevco 5112 represented the consolidated accounts.

Quote

106) Further queries – including what the parties described as ‘the stadium valuation question’ – continued to be addressed in correspondence during April, May and June 2019. All the while the embargo remained in place. On 11 July 2019 the EFL wrote to the Club

a) Acknowledging that, in light of the receipt by the Club of substantial compensation following the departure of its first team manager and staff to Chelsea, the Club’s 3 year aggregate figure for Adjusted Earnings Before Tax was ‘circa £37.1m’

b) Explaining that even though that figure involved a £3.1m ‘sensitivity in relation to stadium rent for the 2018/19 season that the EFL and Club are still in ongoing discussions over’, even with that sensitivity the Club’s forecast result fell within the ULT

Those varied bolded bits suggest that the compensation was received in, or moved into 2018/19? 3 year aggregate figure for Adjusted Earnings before Tax fell by £617,000. No mention of the playoff final- but Compensation was reported at £4m or thereabouts IIRC.

Rent at £1.1m? £4.16m per season seems fairer by far for a transaction of that size. Regardless, I wonder if that £3.1m sensitivity pushed up the Forecast losses and these would therefore drop by the same amount at time of resolution.

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59) For completeness, we record that there was discussion about the Club’s approach to amortisation between the Club and the EFL in April and May 2019:

a) In April 2019, as part of the process of reviewing the Club’s 2019 P&S Submission, the EFL wrote to the Club with various queries. Question 17 was in the following terms: 

‘Can you please explain the variances in Player related amortisation charges from £6.5m in 2017/18 down to £4.6m in 2018/19 up to £25.1m in 2019/20? As part of this, please explain how the charge reduces from £3.3m in the 6 months to December 2018 down to £1.2m in the 6 months to June 2019?

We see a huge spike into 2018/19 above. I appreciate wages will have been down too of course.

The small reconciliation in the year doesn't interest me too much, Derby would have been just about within P&S anyway IMO.

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Based on these figures we therefore have what we know- the 3 years to 2019:

Quote
  • LOSS- £13,407,000
  • PROFIT- £7,207,000
  • LOSS- £31,517,000

3 year loss at this stage- 2 real, one projected- £37,717,000.

The updated and amended version in July 2019- so after the accounting Period in question had concluded, knocked this down by £617,000. Though the compensation and playoff issue seem incomplete?

This loss then drops off the cycle and is replaced by:

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  • PROFIT- £7,207,000
  • LOSS- £30,900,000
  • ALLOWABLE LOSS NET OF ALLOWABLE COSTS AND LATTERLY COVID- £15,307,000

This then morphs somewhat- some clubs surely got unbelievably lucky:

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  • PROFIT- £7,207,000
  • LOSS- £30,900,000
  • ALLOWABLE AVERAGED LOSS- £15,307,000- before halving, it's aggregated at £30,614,000

Let's go with your figures though:

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  • PROFIT- £7,207,000
  • LOSS- £24,900,000
  • LOSS- £35,200,000

This is approximating your not far off figures- not far off £25m and £36m respectively.

This turns into...

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  • PROFIT- £7,207,000
  • LOSS- £24,900,000
  • HALF OF £35,200,000

Bit of a tight rope this season! Let's assume once Covid etc, a breakeven as a couple of posters on DCFCFans seem to think.

As for moving into 2022, assuming this still halved?

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  • LOSS- £24,900,000
  • LOSS- £17,600,000
  • P&S PROFIT NEEDED- £3.5m.

This is assuming the figures in the IDC thing are wrong, ie the £30m loss for 2019. Does the amortisation drop off a cliff in 2020/21? We know Rooney was on £100,000 a week but that £80,000 a week was put into the income kitty by 32Red, IIRC. Bieilk- similar £20k per week, less? Clarke loan- less in the case of the latter I'd surmise.

Edited by Mr Popodopolous
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G STAR RAM does still not appear to get that for FFP they use the Holding Company accounts. Or the Group Accounts.

Sensibly too, it gives the full picture- which the club accounts in isolation just would not. FFP aside, these would necessarily incur greater costs than the club in isolation.

Edited by Mr Popodopolous
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In any season if a club returns a profit for FFP purposes there are no further tests.

So any club which makes an FFP profit of £1 in 2022 will automatically meet FFP regardless of performance in previous years.

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