The Championship FFP Thread (Merged)

[Port Said Red]

@Davefevs @Mr Popodopolous Surely the biggest issue with Stoke is that ground valuation (again). I swear you could buy most of Stoke for around £70m! What would be done with the ground if it wasn't a football ground? Housing has very low values in the potteries, it's also in a complex that includes a hotel and shops, so it's unlikely anyone would want to build more there. 

I just don't understand that valuation in that area.

Edited March 10, 2022 by Port Said Red

[chinapig]

@Mr Popodopolous Fyi on today's Price of Football podcast Kieran Maguire says Sheffield 3 still owes £42m of the £60m price of Hillsborough yet the club is paying £2.8m per annum rent. About the same as West Ham pay for the London Stadium!

 

[Mr Popodopolous]

9 minutes ago, Port Said Red said:

@Davefevs @Mr Popodopolous Surely the biggest issue with Stoke is that ground valuation (again). I swear you could buy most of Stoke for around £70m! What would be done with the ground if it wasn't a football ground? Housing has very low values in the potteries, it's also in a complex that includes a hotel and shops, so it's unlikely anyone would want to build more there. 

I just don't understand that valuation in that area.

I also have a significant issue with the valuation.

If accurate, it is:

1) 25% more valuable than Villa Park (£56m or so)

3) Just under double the Reading stadium (£37m)- just remember where that ground is based or between 2.5-3 x original (£26.5m).

3) Over 3 x St Andrews (£22.7m IIRC) 

4) 70-75% ahead of Leicester, also Midlands based, similar capacity- about £40m or so from memory.

5) Indeed a significant uptick on its own most recent valuation, £40-41m in 2018 using as with now, Depreciated Replacement Cost!! 

Is there a recent discovery of gold and oil in Stoke?

[Davefevs]

20 minutes ago, Port Said Red said:

@Davefevs @Mr Popodopolous Surely the biggest issue with Stoke is that ground valuation (again). I swear you could buy most of Stoke for around £70m! What would be done with the ground if it wasn't a football ground? Housing has very low values in the potteries, it's also in a complex that includes a hotel and shops, so it's unlikely anyone would want to build more there. 

I just don't understand that valuation in that area.

Got to admit, the property stuff is beyond me…I can read other FFP stuff and understand it, but this is a different ball game.  I leave it to @Mr Popodopolous, @Hxjand @BTRFTGas the resident experts.

I know my place

[BTRFTG]

6 minutes ago, Davefevs said:

Got to admit, the property stuff is beyond me…I can read other FFP stuff and understand it, but this is a different ball game.  I leave it to @Mr Popodopolous, @Hxjand @BTRFTGas the resident experts.

I know my place

It's the age old story of value and cost and how folks love to confuse them.

Bespoke assets are difficult to value as, er, they're bespoke. There's either no or a very limited market for those who might wish to purchase them.

For accounting purposes Derby adopted a DRC method (basically what would this cost to replicate) but why do that when you've the asset already? It's only useful for insurance purposes and is NOT a measure of value. In truth stadiums only have value if they may be put to other purposes (suppose an NFL franchise wanted to relocate to UK,) else they're worth the value of the land (site cleared) and 'Use Case' consents achievable (what planners will permit you to build on the site.) In practice snd when discounting by planning levies (S106/CIL,) that's a sum far less than folks imagine.

[Port Said Red]

7 minutes ago, BTRFTG said:

It's the age old story of value and cost and how folks love to confuse them.

Bespoke assets are difficult to value as, er, they're bespoke. There's either no or a very limited market for those who might wish to purchase them.

For accounting purposes Derby adopted a DRC method (basically what would this cost to replicate) but why do that when you've the asset already? It's only useful for insurance purposes and is NOT a measure of value. In truth stadiums only have value if they may be put to other purposes (suppose an NFL franchise wanted to relocate to UK,) else they're worth the value of the land (site cleared) and 'Use Case' consents achievable (what planners will permit you to build on the site.) In practice snd when discounting by planning levies (S106/CIL,) that's a sum far less than folks imagine.

Ok so, are you saying that £70m would be akin to an insurance valuation for a replacement stadium, rather than the amount they could raise by selling it and sharing with Port Vale for example?

If so, then it sort of matches my feeling that it's a "that's it's value to us" figure, a bit like family heirlooms that crop up on the antiques programmes.

I think it's something that the EFL need to be challenging or at least tightening the rules on.

[Mr Popodopolous]

21 minutes ago, BTRFTG said:

It's the age old story of value and cost and how folks love to confuse them.

Bespoke assets are difficult to value as, er, they're bespoke. There's either no or a very limited market for those who might wish to purchase them.

For accounting purposes Derby adopted a DRC method (basically what would this cost to replicate) but why do that when you've the asset already? It's only useful for insurance purposes and is NOT a measure of value. In truth stadiums only have value if they may be put to other purposes (suppose an NFL franchise wanted to relocate to UK,) else they're worth the value of the land (site cleared) and 'Use Case' consents achievable (what planners will permit you to build on the site.) In practice snd when discounting by planning levies (S106/CIL,) that's a sum far less than folks imagine.

Do agree with your overall point although Stoke in this case were carrying the stadium depreciation free at valuation, ie it was pretty much at the valuation on the Balance Sheet that it was in 2018. Carried or shown however?

Raises questions as to what the Profit on Disposal is or should be. One thing I do know, is that the EFL should be swarming all over Stoke's accounts and P&S submissions.

Intriguingly they appear to have had as recently as 2020 no policy for Profit on Disposal of Tangible Fixed Assets and the correct treatment in this respect.

Because remember this is in addition to the 2019/20 Player Impairment! £38m in Covid costs, of which £30m was a claim that Covid has smashed player valuations.

8 minutes ago, Port Said Red said:

Ok so, are you saying that £70m would be akin to an insurance valuation for a replacement stadium, rather than the amount they could raise by selling it and sharing with Port Vale for example?

If so, then it sort of matches my feeling that it's a "that's it's value to us" figure, a bit like family heirlooms that crop up on the antiques programmes.

I think it's something that the EFL need to be challenging or at least tightening the rules on.

Rules have made it immaterial now, excluding any fixed asset sale profit or loss from FFP calculations.

Edited March 10, 2022 by Mr Popodopolous

[BTRFTG]

2 hours ago, Port Said Red said:

Ok so, are you saying that £70m would be akin to an insurance valuation for a replacement stadium, rather than the amount they could raise by selling it and sharing with Port Vale for example?

If so, then it sort of matches my feeling that it's a "that's it's value to us" figure, a bit like family heirlooms that crop up on the antiques programmes.

I think it's something that the EFL need to be challenging or at least tightening the rules on.

That's exactly it. Pride Park's 'value' (sic) was argued the cost of having to reproduce an equivalent facility should Pride Park be destroyed and nothing to do with what it might realise if sold. Recall Derby pay very little (if any) rent and that's a better measure of valuing a property asset. Say they paid £4m a year in rent and held a 25 year lease then the Freeholder is 'guaranteed' income of £100m. You may use that as a guide as to potentially what the freehold asset is worth. That was the scam. On book, as accounts allow one to do, by effectively 'selling to themselves' they doubled the supposed value of the asset (NB it never even had to change hands for cash,) and banked that theoretical 'profit' (sic) to avoid penalties under FFP.

[Mr Popodopolous]

A little bit more...decided to look at the 2020 accounts and the relevant sections for Stoke City Property- and Stoke City Holdings.

The former owns, the latter consolidates that and club.

Stoke City Property- to end of March 2020

As we can see, Intangible Fixed assets have the difference between net disposal proceeds and carrying amount of intangible assets recognised in profit and loss. Easiest example, player sold for £10m 3 years into a 5 year contract, £6m amortised- £4m profit on disposal.

However, there is no such provision for Tangible Fixed Assets- which of course the Bet365 and the Training Ground are!

a) On what basis is it in the accounts- is it carried at cost or valuation and b) How is the disposal treated- is it Proceeds - Cost or Proceeds - Carrying Amount? Literally no guidance though...

Appears to be in the accounts itself at the most recent valuation!

However that first bit is cost...is it even theoretically possible that they have sought to tell it at £70m- that £8m Cost bit?? No accounting policies in place for a scenario of disposal and leaseback!

As we can see, it is in there at deemed valuation which is equal to the Carrying amount.

Stoke City Holdings to May 2020

If we find that they have sold the training ground? Sudden shift in policy, about turn!

The Intangibles are as above, in the usual conventional manner.

Again, where is their policy and how exactly is it carried out...Residual value eh??

It claims stated at cost but then again...

Weird- no cost! Unlike the Stoke City Property bit that was up to just 2 months before...

Unfortunately as we know, FRS 102 accounting policies need to be carried out consistently.

https://stevecollings.co.uk/frc-amends-frs-102/

To what extent has their policy been applied consistently- as recently as accounts made up to 2020, there was no basis as to how the Stadium was carried or as to how disposal and profit or loss would be calculated- none at all!

Interested to know what @Coppello and @Hxj make of this- I definitely remember debates about FRS 102 policies and application thereof in respect of Derby, this has shades of that I think- in parts. Not from an Insolvency POV, more in the sense that do their accounting policies fit within FRS 102 and do so consistently?

Edited March 10, 2022 by Mr Popodopolous

[054123]

So…………..

[Mr Popodopolous]

Was browsing FFP news in general earlier- a good article about FFP/P&S in general albeit with a strong City theme!

https://www.bristolworld.com/sport/football/bristol-city/full-explainer-how-profitability-sustainability-rules-are-about-to-impact-bristol-city-and-other-championship-clubs-3605328

[Mr Popodopolous]

Also found this...have seen this site before, Fulham based. Cottage Analytica.

3 scenarios for P&S to 2021/22- once their results for 2020/21 are out we will know a lot more but in each scenario the poster forecasts a breach that exceeds the Upper Loss Limit- £15m!

https://cottageanalytica.com/2022/02/18/fulhams-2022ffp-position/

It is worth remembering that they sold Sessegnon- an academy product- for £20m + 2 seasons ago...something that has very much not been repeated this time around.

The best case scenario presented- not the worst, the best- is an overspend of £18.5m to 2021/22!!

Fulham have undoubtedly this year been an outlier in terms of relegated, Parachute or yoyo clubs selling and moving on players in recent times. Some yes, but not to the extent of many.

Edited March 11, 2022 by Mr Popodopolous

[Mr Popodopolous]

Some crazy numbers- Aston Villa!

Yes, that surely looks a bit better format wise...

However, when you pull it back and look at it with the EFL permitted Covid losses, they suddenly slide into breach! Remember for 2017/18 and 2018/19 they were under EFL jurisdiction so it feels a grey area??

A lot to unpack as well...how come they received HS2 income seemingly for 2, maybe 3 seasons in a row! Why was the Stadium sale equivalent in the form of Other Loans Receivable- yet a Receivable is supposed to not still be sat on the Balance Sheet within 2 years, supposed to be done within 12 months or less!

Convertible to cash within 12 months or less in general, a receivable- yet it still sits on the NSWE UK Balance Sheet...clearly it was a non-cash transaction but to put it through in that way in conjunction with P&S is very suspect?

Then there is promotion bonuses- although tbh all past precedent I have had and read is that they are excluded from FFP. What about that payment to Lerner though?

Should that be- £30m...Xia to Lerner in 2016, was due to pay him a further £30m if promoted by 2019- they got promoted by 2019 but where in the P&S regs does it imply such transactions should be adjusted out?

Then there is the 2015/16 Depreciation- which potentially enabled a higher or a strong Profit on Sale in 2019!

What of the Training Ground and HS2...should compensation be classed as Other Operating Income or should it be a Profit on Disposal- ie gross fee - amount of Fixed Asset lost?

Edited March 11, 2022 by Mr Popodopolous

[Davefevs]

1 hour ago, Mr Popodopolous said:

Was browsing FFP news in general earlier- a good article about FFP/P&S in general albeit with a strong City theme!

https://www.bristolworld.com/sport/football/bristol-city/full-explainer-how-profitability-sustainability-rules-are-about-to-impact-bristol-city-and-other-championship-clubs-3605328

Brilliant piece of writing!

[Mr Popodopolous]

9 minutes ago, Davefevs said:

Brilliant piece of writing!

Yep, an excellent read- good article downplayed it, excellent read certainly!

[Mr Popodopolous]

They appear not to appreciate the scrutiny, more interestingly they find it amusing.

https://oatcakefanzine.proboards.com/thread/302642/ffp-again?page=16

All I would say is that, the idea of any ordinary fan reporting a club to the EFL over FFP, it feels like an exercise in futility.

The EFL themselves should be across it in a professional way, as a competent organisation who know what's what and have access to Projections and relatively real time info!

Although CLUBS can report, as we saw with Gibson v Derby in 2019 in particular, Couhig hasn't gone away quietly either.

Derby also threatening to take legal action v Reading if relegated by 3 pts or less v Reading in 4th bottom and Barnsley too are exploring their options, again in respect of Reading.

However there is a heavy burden on the EFL to be across this stuff, ideally in real time or as close as practically possible.

Edited March 11, 2022 by Mr Popodopolous

[Mr Popodopolous]

Kieran Maguire!

£66m profit on that stadium sale apparently!?

https://www.stokesentinel.co.uk/sport/football/transfer-news/stoke-city-financial-fair-play-6800769

May 28th 2021 is strange given what another document says.

£70m is also strange given not one, not two but three prior valuations.

Kieran Maguire also claims that the £70m transaction is minus a cost of £4m...well as I have rightly pointed out a) The carrying value as if carried at cost was £28m, the carrying value- ie what it was stated at last valuation was £40m...so where does £4.45m come from.

Edited March 14, 2022 by Mr Popodopolous

[Jerseybean]

Stoke sell stadium and issue shares to comply….https://www.stokesentinel.co.uk/sport/football/transfer-news/stoke-city-financial-fair-play-6800769

 

[Mr Popodopolous]

Definitely needs the EFL to get stuck in, the clubs to get into the EFL.

If we led the way I'd be quite happy, Lansdown needs to be all over their accounts with a fine tooth comb- he after all is an accountant by trade so he should know.

Would have no qualms if our club decided it was fair to report or lodge a complaint about Stoke City to the EFL, their cynicism during Covid has been of a high level.

Back on the numbers:

£88m Loss in Year 1

Halved due to Impact of Covid.

Minus up to a £66m profit on Bet 365.

EFL allowed Covid losses, that includes the player impairment bollocks, £10m across the two seasons. Assume it's a full £10m.

Estimated FFP costs of £7m per season.

The only potential numbers we might have for LAST season was the £56m loss referred to but surely not inclusive of Stadium Sale or profit on transfers.

EFL MUST exclude all Covid costs in excess of the £10m in 2019/20 and 2020/21.

To say nothing of valuation issues or whether Stoke has time travel...

[054123]

Are there any rules governing this?

I presume like other companies accounts you have to attach a value to your assets.

If you’re suddenly in a pickle as Stoke have found themselves in, you can try to dispose of these assets.

As to value you dispose of them, is this governed in any way? If somebody wanted to but my house for 10m I presume I would legally be allied to do so?

However if bet365 were sold Stoke might not have a home?

 

[054123]

56 minutes ago, 054123 said:

Are there any rules governing this?

I presume like other companies accounts you have to attach a value to your assets.

If you’re suddenly in a pickle as Stoke have found themselves in, you can try to dispose of these assets.

As to value you dispose of them, is this governed in any way? If somebody wanted to but my house for 10m I presume I would legally be allied to do so?

However if bet365 were sold Stoke might not have a home?

 

https://www.stokesentinel.co.uk/sport/football/transfer-news/stoke-city-financial-fair-play-6800769
 

[Davefevs]

Mr P….whilst waiting for Stoke’s accounts to come through, here’s their position so far.

Ive prepared 2 sets, one without the £30.1m impairment for Covid and one with.

[Mr Popodopolous]

2 hours ago, 054123 said:

Are there any rules governing this?

I presume like other companies accounts you have to attach a value to your assets.

If you’re suddenly in a pickle as Stoke have found themselves in, you can try to dispose of these assets.

As to value you dispose of them, is this governed in any way? If somebody wanted to but my house for 10m I presume I would legally be allied to do so?

However if bet365 were sold Stoke might not have a home?

 

Up to 2021, there were Fair Value regs, yes the transaction okay but must reflect a Fair Market Value. I'd query parts of that here...hopefully there will be  a rent, paper or real to reflect the transaction in fact I'd say it is a must.

Now the situation reflects that a) Up to 2015/16 at our level and b) Right throughout at UEFA level- any profit (or loss!) on disposal of a Fixed Asset is adjusted out for purposes of P&S/FFP calculations in UEFA's case.

The valuation bit is quite interesting here, using the same method in 2017/18 it was valued at around £40m,  £42m maybe- a huge spike to 2021! The other part of the equation is that if the report is accurate that Profit feels suspect, what it was carried at was never properly stated in the 2019/20 accounts.

ie Carried at cost, carried at value- there was no depreciation for some years owing to the policy of revaluation but for a disposal like this it's usually Proceeds - Carrying Value=Profit (or loss!) on disposal. They also posted each year to 2020 a regular number as to what it would be if in there at cost.

[Davefevs]

2 hours ago, Davefevs said:

Mr P….whilst waiting for Stoke’s accounts to come through, here’s their position so far.

Ive prepared 2 sets, one without the £30.1m impairment for Covid and one with.

Mr P - for info, Stoke’s allowance for 17-18 to 20-21 was £55.5m (£35m + £13m + £13m + £13m divided by 4 multiplied by 3).  Uncannily a £30.1m impairment gets them very close to that figure!!!  Amazing….see second example below.

[Mr Popodopolous]

Cheers Dave- had a look at these and will recalibrate my figures again based on the FFP allowance you posted, I slightly lazily went £7m based on SwissRamble- and post it in a more readable format this time.

Yes, massively uncanny as you say- £30m Impairment in no way matches the £10m 2 year allowance so I'd hope this is all calculated on the EFL's terms for all clubs.

Edited March 16, 2022 by Mr Popodopolous

[Davefevs]

Just now, Mr Popodopolous said:

Cheers Dave- had a look at these and will recalibrate my figures again based on the FFP allowance you posted, I slightly lazily went £7m based on SwissRamble- and post it in a more readable format this time.

For clarity, I gave them £5m for Cat 1 and added depreciation from the accounts to that.

[Mr Popodopolous]

1 minute ago, Davefevs said:

For clarity, I gave them £5m for Cat 1 and added depreciation from the accounts to that.

Thanks- might need to bump mine up a bit as I took Stoke City Community Trust as expenditure on Charitable expenditure and also looked at goodwill amortisation- excluded from FFP and I should probably check the amortisation of e.g. software but that shouldn't be much.

[Davefevs]

Just now, Mr Popodopolous said:

Thanks- might need to bump mine up a bit as I took Stoke City Community Trust as expenditure on Charitable expenditure and also looked at goodwill amortisation- excluded from FFP and I should probably check the amortisation of e.g. software but that shouldn't be much.

You’ve looked deeper than me!

[Mr Popodopolous]

1 hour ago, Davefevs said:

You’ve looked deeper than me!

Between us we'll hopefully get there!

My figures reworked push their FFP costs to between £8-9m per season assuming academy £5m per season. They have a women's team too but cannot find any figures for that anywhere. Unlike many, they don't seem to be on Companies House!! Few hundred thousand a year maybe?

Will probably post these reworked tomorrow.

[Mr Popodopolous]

A fair bit seems odd about this Stoke scenario though. I won't rehash details but:

1) Valuation using the same method as before, at the level it rose to.

2) Carrying Value at time of disposal as per Kieran Maguire of £4.45m?? That does not seem right at all- if you look at the Derby case, the revaluation reserve was surely included within the carrying value at time of disposal.

3) The lack of indication as recently as 2020 as to what that Carrying Value should have been, ie the criteria. Cost, Valuation, Deemed Cost-whatever.

4) Whether the relevant documentation aligns correctly with the stated date of sale included within  the Bet365 accounts. SWFC certainly lacked this!