The Championship FFP Thread (Merged)

[Bristol Rob]

Any chance of a quick summary of clubs flying close to the wind FFP wise?

Assumption is, Stoke and us.

[downendcity]

1 hour ago, Bristol Rob said:

Any chance of a quick summary of clubs flying close to the wind FFP wise?

Assumption is, Stoke and us.

There's flying close to the wind and there's flying close to the wind.

We have shifted out big earners and sold Semenyo ( and probably Scott) in order to bring our books in line with ffp limits.

Stoke have used accounting jiggery pokery by selling their ground to bet 365 which is owned by ..... well, by Stoke's owner. Not only that but I think I'm right in saying that according to OTIB's own financial Batman & Robin ( Mr Popodopolous and Davefevs) they also have also applied some very questionable covid adjustments to their accounts.

So we know exactly who is the most likely to fall foul of ffp and have the book thrown at them, and it's not the club where a player has to be able to do it on a cold , wet Tuesday night!

 

[Mr Popodopolous]

3 hours ago, Bristol Rob said:

Any chance of a quick summary of clubs flying close to the wind FFP wise?

Assumption is, Stoke and us.

Flying close to the wind perhaps not so much but Birmingham, Cardiff , QPR plus perhaps Preston and Swansea could all find additions tight.  Sheffield Wednesday claim to have absolutely slashed losses at £10m x 2 in both League One seasons and we have to take it at their word but it seems a remarkable swing to prudence given multiple loanees and additions from the Championship and one or two from PL.

Check their additions post relegation yet their losses reportedly fell by £15m.

As for us I believe we have about £2-3m  more of headroom so wwre probably trending on 3 year adjusted losses of £36-37m to 2023-24.

Stoke and their accounting for Covid was really suspect but if all accepted they seem well clear of it. Any change would, should be historic.

Edited July 1, 2023 by Mr Popodopolous

[Hxj]

3 hours ago, Bristol Rob said:

Any chance of a quick summary of clubs flying close to the wind FFP wise?

My belief is that the rules (with the assist of Covid) are finally having an impact on spending.  The shenanigans with Derby was the right poke in the eye for all the clubs thinking it was a good gamble.  Now in League 1 and no guarantee of promotion in 2024.

Then you look at Reading who have got themselves in a right mess by over-spending, they will struggle next season.

I know that there are issues elsewhere, but they are generally historic. 

[Mr Popodopolous]

One more note.

I'm sure there aren't FFP breaches coming up but Huddersfield accounts and Sheffield United accounts and the parent Blades Leisure Limited all showing as overdue at CH.

Granted they were due Friday only but they in turn both argued for a Covid extension to CH, end of March was what it should have been.

[Mr Popodopolous]

Accounts for Sheffield United and their parent Blades Leisure Limited have been submitted, should be available in the next couple of days to few days.

[Mr Popodopolous]

They're out on the Sheffield United website.

There's no FFP issues whatsoever. Their Upper Loss Limit to 2022 and to 2023 due to the Covid rollup will be £72m plus allowables.

Surprised they lost as much as they did but remember too the 2018-19 promotion year loss drops off so I'm sure they're strongly clear of FFP. Their issues were more about cash flow and such.

[Mr Popodopolous]

Had they stayed down things might have been quite different but their amortisation will have dropped this year after departures last season.

I expect they're decently clear, as I say had they stayed down.. it maybe would have differed.

Edited July 3, 2023 by Mr Popodopolous

[Mr Popodopolous]

Oh yeah forgot to add, for those who are interested they are available here- for both club and Blades Leisure Limited.

https://www.sufc.co.uk/club/company-information

Edited July 3, 2023 by Mr Popodopolous

[ExiledAjax]

@Mr Popodopolous do we always extend our accounting period? All four companies just extended to 30 June...makes sense for it to be 30 June given they're for the season, but is this new?

Edited July 3, 2023 by ExiledAjax

[Davefevs]

6 minutes ago, ExiledAjax said:

@Mr Popodopolous do we always extend our accounting period? All four companies just extended to 30 June...makes sense for it to be 30 June given they're for the season, but is this new?

Ooooooh, that is new, I missed that today.  City have been 31st May for over 20 years, and I can only imagine this was for legacy reasons, I.e. tying in with other companies maybe?

However for a football club and the summer registration window / contract ending date, it really does make sense to move to 30th June..just makes it all neat and tidy.  Might also be something to do with proposed FFP changes, who knows?

[Mr Popodopolous]

10 minutes ago, ExiledAjax said:

@Mr Popodopolous do we always extend our accounting period? All four companies just extended to 30 June...makes sense for it to be 30 June given they're for the season, but is this new?

That's a good spot. Not even looked at ours for a while! Following other clubs and speculating on their position.

We don't usually do this no, although having just checked Robins Foundation is still end of May atm.

We had it at the of July going back into the 1980s, 1990s and 1998 was made up to 7th June for some reason but that's unusual. One reason could be just in case we have a deadline for next summer relating to FFP we have until June 30th rather than May 31ar to get it in.

Or it could be because the market is quite quiet in May, June especially has been at our level so far this year.

Or to bring it into line with the majority of clubs to make contracts and transfers easier I dunno really, could be anything.

Edited July 3, 2023 by Mr Popodopolous

[Davefevs]

Similar thoughts Mr P!

[ExiledAjax]

Cheers gents. I don't expect it's anything sinister, suspect purely practical reasons like the ones you suggest.

[Rob26]

On 30/06/2023 at 15:02, !james said:

what does this mean for us non financial folk?

 

 

normally it means that £22.5m of debt owed to shareholders has been converted to shares and is no longer debt on the books, to use the full ffp allowances then a certain amount of the money put into the club needs converting to shares/equity or you wont get the full amount for the 3 years that everyone usually quotes as the ffp limits

[Rob26]

here's a good example of how your ffp allowances can be massively reduced if you do not convert to equity to allow the additional money put in 

now one question I have, in this situation are man utd allowed to put money in the current period say 90m and issue equity to get an extra 90m spend on ffp, or are they limited to 30m per period? so new owners could only do it once per season (@ 30m) instead of clocking all that unused (90m) allowance when they surely buy a 100m player with outside cash

here's a good example of how your ffp allowances can be massively reduced if you do not convert to equity to allow the additional money put in 

 

Edited July 4, 2023 by Rob26

[downendcity]

1 minute ago, Rob26 said:

here's a good example of how your ffp allowances can be massively reduced if you do not convert to equity to allow the additional money put in 

now one question I have, in this situation are man utd allowed to put money in the current period say 90m and issue equity to get an extra 90m spend on ffp, or are they limited to 30m per period? so new owners could only do it once per season instead of clocking all that unused allowance when they surely buy a 100m player with outside cash

here's a good example of how your ffp allowances can be massively reduced if you do not convert to equity to allow the additional money put in 

now one question I have, in this situation are man utd allowed to put money in the current period say 90m and issue equity to get an extra 90m spend on ffp, or are they limited to 30m per period? so new owners could only do it once per season instead of clocking all that unused allowance when they surely buy a 100m player with outside cash

here's a good example of how your ffp allowances can be massively reduced if you do not convert to equity to allow the additional money put in 

now one question I have, in this situation are man utd allowed to put money in the current period say 90m and issue equity to get an extra 90m spend on ffp, or are they limited to 30m per period? so new owners could only do it once per season instead of clocking all that unused allowance when they surely buy a 100m player with outside cash

That's three questions, not one!

[Davefevs]

1 minute ago, Rob26 said:

here's a good example of how your ffp allowances can be massively reduced if you do not convert to equity to allow the additional money put in 

now one question I have, in this situation are man utd allowed to put money in the current period say 90m and issue equity to get an extra 90m spend on ffp, or are they limited to 30m per period? so new owners could only do it once per season instead of clocking all that unused allowance when they surely buy a 100m player with outside cash

here's a good example of how your ffp allowances can be massively reduced if you do not convert to equity to allow the additional money put in 

 

Yep, standard stuff, in the Champ if you don’t “underwrite” the losses, then the lower limit of £15m losses (£5m x 3) applies.  If you do by converting to equity, then the upper limit of £39m (£13m x 3) applies.

[chinapig]

1 minute ago, downendcity said:

That's three questions, not one!

To which the answers are:

1. Yes

2. No

3. Don't know.

[Rob26]

30 minutes ago, chinapig said:

To which the answers are:

1. Yes

2. No

3. Don't know.

submit reply button just blanked me and made it 3 posts in one :laugh:, thought i had tidyed it up 

[Rob26]

5 hours ago, Davefevs said:

Yep, standard stuff, in the Champ if you don’t “underwrite” the losses, then the lower limit of £15m losses (£5m x 3) applies.  If you do by converting to equity, then the upper limit of £39m (£13m x 3) applies.

can you only convert the extra £8m equity in each period, or can you not do it for 2 years then decide to convert £24m of equity to get the £39m in the final year?

[Hxj]

14 minutes ago, Rob26 said:

or can you not do it for 2 years then decide to convert £24m of equity to get the £39m in the final year?

The short answer is you can do it in any way that the EFL agree to.

The longer answer is from the regulations:

1.1.19  Secure Funding means funds which have been or will be made available to the Club in an amount equal to or in excess of any Cash Losses which the Club has made in respect of the period from T-2 or is forecast to make up to the end of T+2. Secure Funding may not be a loan and shall consist of:

  (a)  contributions that an equity participant has made by way of payments for shares through the Club’s share capital account or share premium reserve account; or

  (b)  an irrevocable commitment by an equity participant to make future payments for shares through the Club’s share capital account or share premium reserve account. This irrevocable commitment shall be evidenced by a legally binding agreement between the Club and the equity participant and may if The League so requires be secured by one of the following:

   (i)  a personal guarantee from the ultimate beneficial owner of the Club, provided that The League is satisfied that

    (1)  he is of sufficient standing; and

    (2)  the terms of the guarantee are satisfactory;

   (ii)  a guarantee from the Club’s Parent Undertaking or another company in the Club’s Group, provided that The League is satisfied that

    (1)  the guaranteeing company is of sufficient standing; and

    (2)  the terms of the guarantee are satisfactory;

   (iii)  a letter of credit from a Financial Institution of sufficient standing and an undertaking from the Club’s directors to The League to call on the letter of credit in default of the payments from the equity participant being made;

   (iv)  payments into an escrow account, to be paid to the Club on terms satisfactory to The League; or

   (v)  such other form of security as The League considers satisfactory; or

  (c) such other form of secure funding as The League considers satisfactory.

 

As to timing you have to have secure funding in place for each period to get the £13 million allowance.  When you provide the cash in line with your agreement won't really matter.  I suspect that the EFL accept that SL doesn't have a spare £13 million in cash available every year in regular amounts. 

Edited July 4, 2023 by Hxj

[Davefevs]

29 minutes ago, Rob26 said:

can you only convert the extra £8m equity in each period, or can you not do it for 2 years then decide to convert £24m of equity to get the £39m in the final year?

What he said

[Always Believesham]

15 hours ago, Mr Popodopolous said:

That's a good spot. Not even looked at ours for a while! Following other clubs and speculating on their position.

We don't usually do this no, although having just checked Robins Foundation is still end of May atm.

We had it at the of July going back into the 1980s, 1990s and 1998 was made up to 7th June for some reason but that's unusual. One reason could be just in case we have a deadline for next summer relating to FFP we have until June 30th rather than May 31ar to get it in.

Or it could be because the market is quite quiet in May, June especially has been at our level so far this year.

Or to bring it into line with the majority of clubs to make contracts and transfers easier I dunno really, could be anything.

 

15 hours ago, Davefevs said:

Similar thoughts Mr P!

 

15 hours ago, ExiledAjax said:

Cheers gents. I don't expect it's anything sinister, suspect purely practical reasons like the ones you suggest.

Linked to something all 3 of you have said about the transfer activity - we sold Kelly to Bournemouth in May. There can't have been many confirmed transfers before 31st May affecting City since the windows came in & I'm still curious why that transfer went through when it did.

It does feel a bit "short term" to sell a player quickly in order to get the finances logged in 'the seaosn just gone' as it only gives a club 2 years of being able to count the profit towards ffp. We weren't to know but I think the year after Kelly's sell dropped off the 3 year cycle, we could really have done with being able to count that money!

I appreciate circumstance will always dictate whether a club wants to do this, but I can't work out whether this was driven by Bournemouth or City (& why the clubs didn't just extended their accounting period).

[Rob26]

27 minutes ago, Hxj said:

The short answer is you can do it in any way that the EFL agree to.

The longer answer is from the regulations:

1.1.19  Secure Funding means funds which have been or will be made available to the Club in an amount equal to or in excess of any Cash Losses which the Club has made in respect of the period from T-2 or is forecast to make up to the end of T+2. Secure Funding may not be a loan and shall consist of:

  (a)  contributions that an equity participant has made by way of payments for shares through the Club’s share capital account or share premium reserve account; or

  (b)  an irrevocable commitment by an equity participant to make future payments for shares through the Club’s share capital account or share premium reserve account. This irrevocable commitment shall be evidenced by a legally binding agreement between the Club and the equity participant and may if The League so requires be secured by one of the following:

   (i)  a personal guarantee from the ultimate beneficial owner of the Club, provided that The League is satisfied that

    (1)  he is of sufficient standing; and

    (2)  the terms of the guarantee are satisfactory;

   (ii)  a guarantee from the Club’s Parent Undertaking or another company in the Club’s Group, provided that The League is satisfied that

    (1)  the guaranteeing company is of sufficient standing; and

    (2)  the terms of the guarantee are satisfactory;

   (iii)  a letter of credit from a Financial Institution of sufficient standing and an undertaking from the Club’s directors to The League to call on the letter of credit in default of the payments from the equity participant being made;

   (iv)  payments into an escrow account, to be paid to the Club on terms satisfactory to The League; or

   (v)  such other form of security as The League considers satisfactory; or

  (c) such other form of secure funding as The League considers satisfactory.

 

As to timing you have to have secure funding in place for each period to get the £13 million allowance.  When you provide the cash in line with your agreement won't really matter.  I suspect that the EFL accept that SL doesn't have a spare £13 million in cash available every year in regular amounts. 

so its when the cash was put in and you can equity convert at a later date?

which is typical how most clubs write it off 

[Davefevs]

14 minutes ago, Always Believesham said:

 

 

Linked to something all 3 of you have said about the transfer activity - we sold Kelly to Bournemouth in May. There can't have been many confirmed transfers before 31st May affecting City since the windows came in & I'm still curious why that transfer went through when it did.

It does feel a bit "short term" to sell a player quickly in order to get the finances logged in 'the seaosn just gone' as it only gives a club 2 years of being able to count the profit towards ffp. We weren't to know but I think the year after Kelly's sell dropped off the 3 year cycle, we could really have done with being able to count that money!

I appreciate circumstance will always dictate whether a club wants to do this, but I can't work out whether this was driven by Bournemouth or City (& why the clubs didn't just extended their accounting period).

It was a decision based on vanity imho, ie to show a profit…and more than likely a bigger bonus for the CEO.

It actually worked against us for FFP further down the line.

Wed already banked the Bryan, Flint and Reid money in the 18/19 season.  We didn’t need to Kelly money in that year.

[Hxj]

Just now, Rob26 said:

so its when the cash was put in and you can equity convert at a later date?

It's more complex than that.  For each season you want to access the higher loss limit you need secured funding in place.

So for 2023/24 season SL could put in place a personal guarantee for £15 million this month.  That would count as secure funding so the FFP limit would be £13 million for 2023/24.

He could then fund the cash flow throughout the season introducing the cash as a loan each month.  That doesn't count as secure funding. 

Finally in July 2025 he could remove the personal guarantee and convert the loan to equity, plus issue another £15 million of shares for the secure funding for 2024/25. 

Every club does it differently every year to some extent, but eventually as you say it usually ends up as equity,

[Mr Popodopolous]

5 hours ago, Always Believesham said:

 

 

Linked to something all 3 of you have said about the transfer activity - we sold Kelly to Bournemouth in May. There can't have been many confirmed transfers before 31st May affecting City since the windows came in & I'm still curious why that transfer went through when it did.

It does feel a bit "short term" to sell a player quickly in order to get the finances logged in 'the seaosn just gone' as it only gives a club 2 years of being able to count the profit towards ffp. We weren't to know but I think the year after Kelly's sell dropped off the 3 year cycle, we could really have done with being able to count that money!

I appreciate circumstance will always dictate whether a club wants to do this, but I can't work out whether this was driven by Bournemouth or City (& why the clubs didn't just extended their accounting period).

 

5 hours ago, Davefevs said:

It was a decision based on vanity imho, ie to show a profit…and more than likely a bigger bonus for the CEO.

It actually worked against us for FFP further down the line.

Wed already banked the Bryan, Flint and Reid money in the 18/19 season.  We didn’t need to Kelly money in that year.

I do agree although vanity not just with Ashton IMO but also SL spoke of his pride didn't he about finally turning a profit.

Bonus considerations a good point too.

I wonder if too if a factor could have been to fall below the £15m Lower Loss future monitoring limit, that bit is pure speculation on my part but the monitoring could have been reduced further if adjusted losses in a given period fall below £15m.

All the same it did seem oddly rushed. Would have reduced FFP pressure a lot last season had the Kelly sale been in 2019-20 rather than 2018-19.

Edited July 4, 2023 by Mr Popodopolous

[Hxj]

7 hours ago, Davefevs said:

It was a decision based on vanity imho, ie to show a profit…and more than likely a bigger bonus for the CEO.

It actually worked against us for FFP further down the line.

I'm not sure that it does.  My understanding is that where you have two deals in the same transfer window, but either side of an accounting date that are connected you can treat them as connected.  For example the cost of Kalas is set against the income from Kelly.   The profit on Kelly for FFP purposes is reduced by the cost of Kalas and the Kalas costs are therefore not deductible in future accounting periods.

I have no idea where this belief comes from, but it makes sense from a commercial viewpoint.

Edited July 4, 2023 by Hxj

[Davefevs]

26 minutes ago, Hxj said:

I'm not sure that it does.  My understanding is that where you have two deals in the same transfer window, but either side of an accounting date that are connected you can treat them as connected.  For example the cost of Kalas is set against the income from Kelly.   The profit on Kelly for FFP purposes is reduced by the cost of Kalas and the Kalas costs are therefore not deductible in future accounting periods.

I have no idea where this belief comes from, but it makes sense from a commercial viewpoint.

Out of interest, How is Kalas’s inbound transfer (01.07.2019 - 19/20 accounts - summer 2019 window) from Chelsea linked / connected to Kelly’s outbound transfer (18.05.2019 - 18/19 season - summer 2019 window) to Bournemouth…other than by proximity of date / window?

The transfer profit stated looks to include the full amount for Kelly, whilst the intangible assets looks to include the full cost as an “addition”.

Transfer profit in 18/19 accounts is £38m (Reid, Bryan, Flint and Kelly)

Additions in 19/20 accounts is £26m (Kalas, Bentley, Massengo, Nagy, Dasilva, Palmer, Wells etc)

Edited July 5, 2023 by Davefevs