The Championship FFP Thread (Merged)

[Bristol Rob]

Mods, can you merge please?

[exAtyeoMax]

44 minutes ago, Bristol Rob said:

Mods, can you merge please?

WTF!

[Sweeneys Penalties]

11 hours ago, exAtyeoMax said:

WTF!

another sale Stoke City could be forced to sell stadium to avoid breaching financial rules after £88m loss (msn.com)

[Mr Popodopolous]

20 hours ago, havanatopia said:

Like I said in THE Derby thread.. straight 2 points deduction now, 18 to start next season and 10 million fine. If they appeal double the fine and points deduction. 

Stop messing about and get on with their fully deserved demotion.

Adams Park is a lovely little ground and they make a decent chip. 

That would be an excellent and richly deserved outcome. They really need to make an example of a club, to get the message home. Preferably a 'bigger' one.

Alternative version of your idea could be two points for small technical breach to 2020/21, then investigate at leisure from June onwards, while in League One.

Quite possible that while there is an ongoing investigation a Soft Embargo is in play as a routine matter which would further hem them in.

As it stands though, the good news is that if the Disciplinary Commission- the one who cleared them last August- handed down a hefty Sanction, then the League Arbitration Panel would hear any Appeal.

This is the Upper Body legally speaking and perhaps more importantly was the one who found them guilty in the first instance. In theory they could even increase a punishment and being the Upper Body, their verdict is the binding one.

Edited May 27, 2021 by Mr Popodopolous

[Mr Popodopolous]

Well I wrote a big post on Stoke but it didn't post and now won't come up again.

EFL need to stand firm here, will post more on it later. 

[Mr Popodopolous]

Okay here we go. Some of the reporting, is/has been poor. Piece in the Daily Mirror and some Tweets by the Stoke Sentinel journo IMO aren't giving the full picture.

The EFL, like UEFA and the PL- well UEFA led and the others followed, as we know in their wisdom decided to switch the period to 2020 to a 4 year period. Not as simple as adding up the 4 years though, oh no.

A perfect example would be I don't know, pick a club who spent 2 years in PL and 2 years in the Championship. Upper limit in PL is £35m, at our level it's £13m and it stays that way in order to harmonise between the 2 divisions.

Take Huddersfield. £35m x 2 and £13m x 2=£96m. Divide that by 4 and then x 3=£72m. Huddersfield can record an FFP loss to 2021 of up to £72m effectively (as a Championship perennial such as us it would be £39m).

Then you have the adding and halving of 2019/20 and 2020/21, this is the first bit and where the Governing bodies come in. Stoke's position therefore I make it:

£35m + £13m x 3=£74m/4 x 3=£55.5m. Stoke can therefore record up to 2020/21, an FFP loss not exceeding £55.5m.

Then you have the 3 into 4. Pre Covid it's of course:

Quote

• T-2=2017/18
• T-1=2018/19
• T=2019/20

Now it becomes:

What would ordinarily be T-3 becomes T-2 and T-3 isn't relevant but now becomes it and it=2017/18.

What would ordinarily be T-2 becomes T-1 and it=2018/19.

T is now the combined average of this and last season, after Covid Allowances.

Therefore we are assessing the following:

Quote

• T-2=2017/18
• T-1=2018/19
• T=Combined Average of 2019/20 and 2020/21.

Would have been simpler to freeze this season, but with sanctions and soft embargoes etc in place, to take the prior 3 seasons as the relevant and same period with Points off this season where necessary and pick up again in 2021/22 with 2020/21 dropping off and 2018/19 and 2019/20 the prior assessment periods but hindsight eh!  There was less disruption by far to Accounts last season than this, income losses were moderate and not so hard to quantify as I suspect they would be in 2020/21.

Edited May 27, 2021 by Mr Popodopolous

[Mr Popodopolous]

That's the background. Now a bit on Stoke themselves.

I was a bit surprised that Kieran Maguire used the Club and not the Holdings Accounts as the basis for assessment. I would have used the Holdings, this included the Stoke City Property Limited Accounts- ie the Ground, Training Ground and one or two other bits.

Surprisingly, I got quoted (my words, not me IIRC) on the Stoke forum- even formed a bit of a basis for a thread! 

Anyway, Stoke. Some of the reporting in the media is questionable. As I said I am using the Holdings and not the Club Accounts for the basis of this.

They recorded to 31st May 2020 a Loss of £88,455,000. If there is anything after the £88,455 it's not immediately apparent in the Accounts!

However. of that there was an Impairment of Player Registrations listed as £42,516,000. This shoves the future obligations into this period- Impairment means worth less than paid for and Book Value basically. Less valuable than stated on Balance Sheet.

Of this Impairment, Stoke are claiming that £30.131m is directly attributable to Covid 19- that means that the remainder would count in full still, but they are arguing that this £30.1m reflects how the Market has fallen for their Players with Covid. They also claimed to have hired Independent Experts, and that it's in accordance with EFL guidance.

Further to this, where they are undoubtedly on safer ground is declaring more routine lost Revenues to Covid. This comes to £8,092,000. This is more routine stuff- mix of Lost Revenues, not utilising Furlough, Government Schemes and the like.

Additionally, they are claiming that due to the delay in the season, some £8.7m in Revenue will appear in 2020/21 Accounts. This seems fair enough- I assume some will be the remainder of Parachute Payments that would have appeared in June and July, as we've seen with a few PL clubs, hence slightly lower PP in 2019/20.

So far it's:

£88,455,000-£30,131,000-£8,092,000=£50,232,000. I am not counting the deferred Revenue as to count it and then defer would be double counting and that would be stupid surely. If it's deferred Revenue then to reduce a loss in the first half of the period and account for it in the 2nd...nah.

Plus in general, Swiss Ramble in the past has suggested that Stoke's Allowable Costs ie standard FFP are £7m per season- looks like a £43,232,000 loss before halving.

Now there are have been conflicting reports as to whether they can sell the Ground from a logistical POV. I would say they can, owing to the Holdings vs Club bit. I did wonder, as indeed I reported on here whether the reason they had extended the Reporting Period of Stoke City Property Limited from end of March to end of May 2021, as well as bringing it into line, was to enable them to buy time to explore this option by the end of the Reporting Period- should appear on the Land Registry by late June/mid July if it happens in the correct timeframe? I would be interested to know why Richard Kingsley Smith was appointed on April 27th 2021 to Stoke City Holdings- I did wonder if he had any valuation expertise. 

Unless of course, this is an attempt at double three-card trick- write away £30m of Amortisation in the form of Impairment in this period then sell the Stadium to be sure- as in Summer 2022 they have a lot of contracts that expire. It appears that they might be attempting back to back loopholes and I hope the EFL are all over this.

Talking of the Amortisation and the impact moving forward, the Carrying Amount now is £21,027,000, down from £83,084,000- this was through a mix of standard Amortisation charge, Impairment charge that is normal and the £30m that they are claiming is linked to a fall in Transfer Values.

This could lop it down by £15-25m per year, as it states there is a maximum period of 4 years. Maybe I'm overestimating it but it definitely could knock a decent chunk off it.

Now I question how great a Profit they could legitimately gain from a sale- and ironically it's owing to their past transparency and openness. A sale itself would be easy enough to do- hire a valuer, sell to a company outside of the Group controlled by one or more of the Relevant Directors, maybe even Denise Coates and sell and leaseback on commercial terms. Seen a few suggesting selling it to Bet365 but surely Stoke City Holdings given its parent is Bet 365 would have to leave the Group. Adjust out on consolidation and all that.

To suddenly make a big profit, given regular valuations and use of a consistent methodology over a period of time- how would you justify this? Would be inconsistent to say the least. The valuations fall within a reasonable range and they fall or fell every 3 years, 2012, 2015 and 2018- and then Directors using the same methodology in 2019 and 2020 had only minor differences. I don't see how given they have applied the same methodology on a consistent basis, any kind of meaningful profit would be justified- certainly not for FFP purposes.

[Mr Popodopolous]

On a side note, it was confirmed today Reading lost Omar Richards to Bayern on a free.

Reading you will recall, are in and around the FFP limits- may well be over them. One reason I saw cited in January was that they couldn't offer him what they thought he was worth due to EFL limitations for past big spending combined with not selling some players at the appropriate time. Serves them right I say!   Had they sold a couple of those players, the wage limitations might not have been so strict and they could perhaps have renewed Richards, even if only to sell him for a good profit- Karma!

On another forum I used to post on, there used to be a point and laugh emoji- shame there isn't one on here as it feels fitting for Reading. If Tom McIntyre- though clearly not on the level of Richards, if that situation is similar, maybe worth a look.

Edited May 27, 2021 by Mr Popodopolous

[Mr Popodopolous]

Using this as a (very) rough guide...all credit to Swiss Ramble here- I look forward to his assessment to 2019/20!

2017/18 PL.

£23m/£35m loss (FFP)

2018/19 Championship

£8m/£13m loss (FFP)

2019/20 Championship.

£21,616,000 loss (FFP)/£13m.

Problem is of course that stupid rollup. Saved quite a few clubs tbh.

This is the net result of the halved loss- should I round it like he has to £21.61m maybe? Maybe not.

I make it with rounding anyway, £52,616,000 out of £55.5m!! To sell the Ground and attempt the Impairment trick- combined with Parachutes x 3  well it would be beyond ridiculous, for that to stand.

Bit more on the Stadium and how it would suddenly either plummet in Net Book Value or surge in Market Value in order to make a substantial Profit.

 

Valued independently in 2012, and the Accounting Policies listed above- Valuation method too.

Seems to be the same- Policy wise- in 2015.

Although I note it says FRS 15??

Ah here we go, from 2016 it is under FRS 102- but the same policies applied. Like I have said in the past, the Coates family in general terms have struck me as doing things by the book- I'll qualify that by saying Peter in particular, unsure about his son! Peter has taken a significant backseat apparently, his son has stepped up along with CEO.

FRS 102- first valuation but still using that method and the methods laid out...

 

Then in 2019. Directors used the same methodology to check it post relegation.

Then again in 2020!

How do you justify anything higher than a modest or even small Profit on Disposal? The amounts have remained fairly consistent, whether valued by GVA Grimley or the Directors using the same methodology. The methodology that is the EFL's preferred one in terms of such transactions!

Edited May 28, 2021 by Mr Popodopolous

[Mr Popodopolous]

One bit I forgot to add- Stoke's method here as well as Impairment blah blah blah can be summed up in one 3 word expression.

Big Bath Accounting.

[walkley_owl]

Anyone bought MrP a blow up doll. 

 

We will be back, as a club we've never gone bust. Unlike you *****

18 minutes ago, Mr Popodopolous said:

One bit I forgot to add- Stoke's method here as well as Impairment blah blah blah can be summed up in one 3 word expression.

Big Bath Accounting.

Explain Frs102, Frs105. 

 

You can't you odd ***. 

[Mr Popodopolous]

Is a bit of fun but seem to have touched a nerve?

Don't usually taunt but enjoy League One...

Big Bath Accounting, just a phrase I saw somewhere, basically means making bad accounts look worse when an opportunity arises in order to improve the presentation further down the line.

Sheffield Wednesday got their comeuppance. which they surely deserved. Actually would have preferred Derby to go down, the worse of the two but when characters like you appear I wonder. I trust your stage name would be something like "The Great Bellendo".

Anyway my track record isn't the worst...have called out certain clubs and decent number of said clubs have either been penalised or ended up in battles with the EFL.

Edited May 28, 2021 by Mr Popodopolous

[Mr Popodopolous]

I forgot to add earlier, a 3-letter swear word- that's novel by @walkley_owl . Three asteriks.

Defensiveness and denial does odd things to people. however I remember reading a good forum called OwlsOnline in 2019 and 2020. Clearly some intelligent posters, financially savvy etc yet I saw a rather puzzling claim that the Stadium sale could be pushed back owing to novation etc. Not a slight or a dig but it seemed rather niche and possibly unlikely to stand up.

Anyway, it turned out not to have been the case- the view of the Club, the input from the Auditors- and yes the 'guidance' from the Football League, it was all found to be wanting. I saw this view on a number of platforms, the Novation argument- and it was wrong, because the Club even in effect acknowledged as much by rolling the sale and leaseback forward to 2018/19, with the correction to the Accounts.

The Novation argument, was it merely wrong or did it contain an element of wishful thinking I wonder?

Edited May 28, 2021 by Mr Popodopolous

[havanatopia]

9 hours ago, Mr Popodopolous said:

That would be an excellent and richly deserved outcome. They really need to make an example of a club, to get the message home. Preferably a 'bigger' one.

Alternative version of your idea could be two points for small technical breach to 2020/21, then investigate at leisure from June onwards, while in League One.

Quite possible that while there is an ongoing investigation a Soft Embargo is in play as a routine matter which would further hem them in.

As it stands though, the good news is that if the Disciplinary Commission- the one who cleared them last August- handed down a hefty Sanction, then the League Arbitration Panel would hear any Appeal.

This is the Upper Body legally speaking and perhaps more importantly was the one who found them guilty in the first instance. In theory they could even increase a punishment and being the Upper Body, their verdict is the binding one.

Quite possibly equally as effective .

[Mr Popodopolous]

Seen suggestions online that Stoke should sell the Stadium to Bet365.

Makes sense Valuation and Profit debates aside, except seems problematic within the Structure if it's selling directly to Bet365.

As per the most recent Accounts for the Club, Holdings, Property and finally the Top company in the Group.

Well to cut a long story short, the Top company is...and where as a result does the Stadium already sit? Surprisingly the Training Ground does not appear on those Bet365 Group 2020 Accounts.

Stadium sits on...

As we can see, Stoke City Property Limited.

Under Stoke City Holdings....

...As for that matter is the Football Club.

All rightly show Bet365 Group Limited as the top company. Sell to Bet365 directly?

Oops, sits on the Balance Sheet for Bet365 directly- how do you then sell to Bet365 itself?

As for the Training Ground. Could be included under Freehold Land and Buildings I guess- but seems not to be provided for specifically.

Edited May 29, 2021 by Mr Popodopolous

[Hxj]

On 29/05/2021 at 03:40, Mr Popodopolous said:

Oops, sits on the Balance Sheet for Bet365 directly- how do you then sell to Bet365 itself?

You are looking at the Group Balance Sheet which includes all the assets and liabilities of the Group headed by Bet 365 Group Limited, which will exclude items such as investments in subsidiaries and intra-group loans.  The Company Balance Sheet for Bet 365 Group Limited does not include the individual Football Club assets.

On 29/05/2021 at 03:40, Mr Popodopolous said:

As for the Training Ground. Could be included under Freehold Land and Buildings I guess- but seems not to be provided for specifically.

It will be included in the Group Balance Sheet under "Freehold Land and Buildings".  The reason that the Stadium shows up separately on the Group Balance Sheet is that it is included on a "Valuation Basis" and therefore needs to be disclosed separately.  The other land and buildings are all included on a "Cost Basis". 

[Mr Popodopolous]

14 hours ago, Hxj said:

You are looking at the Group Balance Sheet which includes all the assets and liabilities of the Group headed by Bet 365 Group Limited, which will exclude items such as investments in subsidiaries and intra-group loans.  The Company Balance Sheet for Bet 365 Group Limited does not include the individual Football Club assets.

It will be included in the Group Balance Sheet under "Freehold Land and Buildings".  The reason that the Stadium shows up separately on the Group Balance Sheet is that it is included on a "Valuation Basis" and therefore needs to be disclosed separately.  The other land and buildings are all included on a "Cost Basis". 

Okay thanks, makes sense- however can't sell to Bet 365 Group Limited directly I assume- being already on the Group Balance Sheet?

Yep, thanks thought it might be- Cost rather than Valuation, but on the Stoke Holdings/Property Accounts it does suggest that the Cost and Valuation don't materially differ IIRC.

As an aside, given the regular and recent Valuations for the Stadium and the Training Ground seemingly not having a material difference between Cost and Valuation, a big profit on disposal for a Sale and Leaseback? Feels hard to justify...

[Mr Popodopolous]

Blackburn. Small update.

Quote

9. Transfer Embargo

In the light of reports of a transfer embargo having been placed on the club MC stated that under EFL rules they had to submit accounts by 1st March and 2 year projections by 31st March and that they had done this. The EFL had some queries on the data which the club were working with them to clarify before 30th June when any full embargo would come into place. The owners had provided all the assurances asked by the EFL and the club were confident that everything would be resolved by 30th June.

https://www.rovers.co.uk/siteassets/fans/fans-forum/ff-zoom-minutes-18.5.21.pdf

Player Sales? Just about fine up to 2021 but demonstrate that from 2021/22 there will be cutbacks/net savings to successfully walk the tightrope and ensure future compliance in the relevant period? Asset Sales?

Perhaps fixing it to buy time and avoid at minimum, an EFL 'Agreed' Business Plan which in turn would steer the club away from failing P&S- see Reading but they appear not to have sold sufficient players to avoid it escalating.

This tells me that contrary to some media reports and Club Statements, some of the 10 were indeed P&S related, in terms of Future Financial Information or similar. That said I certainly don't believe e.g. Coventry and Luton fell into that category.

Edited May 31, 2021 by Mr Popodopolous

[Hxj]

6 hours ago, Mr Popodopolous said:

Blackburn. Small update.

FFP filing not dealt with by 31 March following end of year - soft transfer embargo -  no progress by 30 June - full embargo.

At least there is some evidence that the EFL is beginning to turn the screws on slow compliers. 

[Hxj]

6 hours ago, Mr Popodopolous said:

Okay thanks, makes sense- however can't sell to Bet 365 Group Limited directly I assume- being already on the Group Balance Sheet?

They can sell it to any company outside of the Football Club group, (being Football Club, Property and Holdings) to realise a profit for FFP purposes.  The original cost was around £28 million, so selling at current valuation would result in a £12 million profit on that basis.

[Mr Popodopolous]

Coventry- literally nothing to write home about P&S wise in terms of trouble etc. This was on a League One income and would have included mid March to end of May pandemic wise. Needless to say, their Embargo is lifted.

https://www.ccfc.co.uk/news/2021/may/news-coventry-city-publish-accounts-for-year-ended-31st-may-2020/

Edited May 31, 2021 by Mr Popodopolous

[Mr Popodopolous]

10 hours ago, Hxj said:

They can sell it to any company outside of the Football Club group, (being Football Club, Property and Holdings) to realise a profit for FFP purposes.  The original cost was around £28 million, so selling at current valuation would result in a £12 million profit on that basis.

In theory then to Bet 365?

Would have thought from an arms length POV, might have been better to sell to a commonly owned company, ie owned by one of the Coates family but that doesn't fall within the Bet 365 Group or subsidiaries- also seems to be a common theme that one of the conditions for a Stadium Sale and leaseback is that it can't form a material part of operations or words to that effect- selling to Bet 365 Group e.g. may fall foul.

Depreciated Replacement Cost seems to be the basis of valuation in the Accounts. It's therefore DRC Valuation-Cost=Profit or Loss?

God knows how Sheffield Wednesday's valuation surged to £60m given a 2014 valuation of £22.25m!? Even changing to a Cost methodology, the actual valuation doesn't seem right at all.

Edited May 31, 2021 by Mr Popodopolous

[Hxj]

@Mr Popodopolous I see no issue in selling within the Bet 365 group, probably simplest to keep a common parent in case the ownership of the group and the football part ways.  Keeping the ownership within the same group helps on the tax side.  I think that the EFL restriction is too keep the stadium as a simple sale and lease back, rather than confuse the issues as to what is football income and non-football income.  I don't see that restricting ownership outside the football group.

Given that revaluation is not a profit for FFP, neither is depreciation, I see profit as DRC - Cost as you say.

Sheffield Wednesday are a League 1 club now so I really don't care on FFP, I do care about the club which by all accounts is currently imploding.  I fear that if they fail to get promotion next season they might well disappear for some time.

Edited May 31, 2021 by Hxj

[Hxj]

24 minutes ago, Mr Popodopolous said:

Coventry- literally nothing to write home about P&S wise in terms of trouble etc. This was on a League One income and would have included mid March to end of May pandemic wise. Needless to say, their Embargo is lifted.

https://www.ccfc.co.uk/news/2021/may/news-coventry-city-publish-accounts-for-year-ended-31st-may-2020/

I fundamentally disagree!

Been through some rough times over the years I remember watching City play then at Northampton where there appeared to be more away fans than home fans.

The statements by the club and the accounts are crystal clear.  They have even taken the trouble to explain the relevant details.  Personally I would write home about that, and how I wish everyone would follow their example.

[Sweeneys Penalties]

and the latest from South Yorkshire Potential player walkout - Sheffield Wednesday Matchday - Owlstalk | Sheffield Wednesday News for SWFC fans

[Mr Popodopolous]

12 minutes ago, Hxj said:

I fundamentally disagree!

Been through some rough times over the years I remember watching City play then at Northampton where there appeared to be more away fans than home fans.

The statements by the club and the accounts are crystal clear.  They have even taken the trouble to explain the relevant details.  Personally I would write home about that, and how I wish everyone would follow their example.

What I meant was, nothing in terms of whether they'll be up near the breach threshold any time soon.

Yep, they played at Northampton for a while- St Andrews for 2 seasons- fell as low as League Two not long ago!?

The transparency is to be commended- they are now moving back to the Ricoh I believe.

Edited May 31, 2021 by Mr Popodopolous

[Hxj]

4 minutes ago, Mr Popodopolous said:

What I meant was

I know - just gently pulling your leg!

Back to the Ricoh - horrible place - and then with luck on to a new stadium 

[Mr Popodopolous]

Swiss Ramble and their analysis of Stoke's Accounts and position.

Based on the formula for the rollup on the EFL FFP Regulations, I make Stoke's maximum permitted FFP loss to 2021 ie Accounting Loss-FFP Costs- Covid Costs and factoring in the 4 year upper loss divided by 4 x 3 to be £55.5m.

£35m + £13m + £13m +£13m=£74m. 

£74m/4=£18.5m.

£18.5m x 3=£55.5m.

 

Edited June 1, 2021 by Mr Popodopolous

[Davefevs]

3 hours ago, Mr Popodopolous said:

Swiss Ramble and their analysis of Stoke's Accounts and position.

Based on the formula for the rollup on the EFL FFP Regulations, I make Stoke's maximum permitted FFP loss to 2021 ie Accounting Loss-FFP Costs- Covid Costs and factoring in the 4 year upper loss divided by 4 x 3 to be £55.5m.

£35m + £13m + £13m +£13m=£74m. 

£74m/4=£18.5m.

£18.5m x 3=£55.5m.

 

Not sure it works like that.  Surely it’s still £61m (35+13+(13+13/2))?  Just that years 3 + 4 loses care divided by 2, and year 1 and 2 are full.

What we’re year 1 and 2’s losses?  Wasn’t 19/20’’s £86m loss?

[Mr Popodopolous]

30 minutes ago, Davefevs said:

Not sure it works like that.  Surely it’s still £61m (35+13+(13+13/2))?  Just that years 3 + 4 loses care divided by 2, and year 1 and 2 are full.

What we’re year 1 and 2’s losses?  Wasn’t 19/20’’s £86m loss?

You might well be right, but the EFL regs make me wonder.

For simplicity purposes, I'm assuming that the Coates family have stuck in the sufficient equity/cash- funding basically- to take them to the Upper Limit. Gets even more complex if not!

Seems as per Swiss Ramble to be an aggregated Year 1 and 2 loss after Allowances of £31m. Believe they're on a fairly sticky wicket P&S wise if the Averaging works as the Rules suggest they could.

Edited June 1, 2021 by Mr Popodopolous