Sorry it's taken so long, I've been busy in my shed...
How much for a seat?
A couple of weeks ago the Albion announced their financial results, and confirmed a loss of £10.4 million for the year to 30 June 2015, a slight improvement on the previous year.
The news has been followed by a release that the club are potentially increasing ST prices by a couple of pounds of month for early bird renewers. This has been met with a mainly positive response from NSC.
The recently released accounts however reveal that for one fan the price of a home ticket last season was an eye-watering £453,856.52.
That fan is of course the one and only Tony Bloom. I suspect for his matchday price he probably received a free Bovril, programme and a booster cushion, but even so it shows just how dependent the club are on his benevolence and interest free support for the club.
The accounts have already been reviewed by the king of football analysis in the Swiss Ramble blog, but I’ve played around with the numbers a bit more since then, so have highlighted some other issues.
Where does the money come from?
Football clubs broadly get their sales income from three sources, fans, sponsors and TV. In the Premier League TV income for a small club such as Crystal Palace or Crystal Palace can be up to 90% of total income, but in the Championship clubs are far more dependent on other sources.
An analysis of the Albion since moving to ‘The’ Amex shows:
Fan income
The first thing to note is the far bigger impact that fan contributions have on club finances in the Championship, with over half the total income coming from that area.
What is also noticeable that the frankly rubbish football that was on display last season had a negative impact on attendance income (down over half a million pounds) as average attendances fell by about 1,500.
On top of that retail income fell by a greater proportion, which, considering the new kit deal with Nike kicked in, was surprising.
However, the lack of success on the pitch last season, (remember the first match where our strike force was Fenelon and O’Grady) meant that the initial enthusiasm for Nike replica kits soon waned.
I’m hoping however that as the Nike deal was a new one that the club may have been making better profit margins on merchandise, which will counterbalance the decrease in sales.
Catering income fell disproportionately compared to ticket income. There were some grumbles in relation to issues with caterers, but also because the club didn’t host any concerts, unlike in 2014 when Rod Stewart’s croaking in the summer had everyone rushing for a pie and half a dozen pints.
The club hierarchy are keen to maximise the income generated, which makes sense given that there the stadium hardly generates any money for 340 days a year on non-matchdays.
This is why activities such as the planned hotel could be useful, as it will provide all year income.
Commercial Income
Here the club have done extremely well. An increase of over half a million quid is a considerable achievement in getting sponsors interested in the Albion.
Certainly having the Amex in its splendour helps impress commercial sponsors.
The Rugby World Cup weekend this season may have helped the club in this regard too this season and beyond, as the Japan v Saffers result, and the accompanying publicity, have enhanced the reputation of the Amex.
Costs
Running a football club, especially in a state of the art stadium such as the Amex, is a costly business.
The Albion use their own metrics and subtract non-football expenses from total income to work out a pre-football profit figure.
The calculation of this figure seems to have been tweaked a bit in the four years at the Amex as new people have come in, so I have tried to back out some numbers to achieve consistency from season to season over the four Amex years.
One thing that is very striking is the huge efforts to cut the non-football costs. There have been many tales of poor cost control when the initial move to the Amex occurred, and this has been a painful exercise in identifying where the excesses arose.
It’s to the credit of Paul Barber and his team that this has been addressed, as the less money wasted on non-football matters means there is more available on the playing budget.
Some non-football costs are unique to the Albion (transport, wi-fi, real ale etc.), which explains why it still costs more nearly £12 million to run the club from a non-football perspective.
The scope for further cost-cutting in the non-football area is probably limited though, so I don’t see much scope for this falling in future years, and giving the manager additional funds to invest in player transfers and wages.
Football costs rose significantly in 2014/15. A major factor in this is the opening of the Lancing training facility and the costs of running a Grade 1 Academy.
David Burke came in for a lot of stick last season for his signings and reliance on loan players (rightly so, although some have made huge improvements this season), but it was an excellent achievement to achieve Grade 1 status.
Whilst the club receive a greater grant for running Grade 1, it comes a long way off covering the costs of the Academy.
Lancing and the Academy also explain why employee numbers have risen. To obtain Grade 1 status there are strict criteria governing the number of coaches, mentors, physios etc. for Academy trainees. The numbers below don't include match day staff, but do show the Albion is now a major private sector employer in Brighton.
Wages are a scary 87% of total income, it is little consolation that other clubs in this division have an even worse ratio in this regard (some have been as high as 170%). What this means is that for every £100 that the club generates in revenue, £87 goes out in wages.
I’ve rearranged the numbers in the accounts to calculate the following expense analysis.
If my figures are correct, (and I’m the first to admit I may have made some errors) then the total costs of running the club rose substantially compared to 2014 from £38.5 million to £42.9 million. This works out as over £820,000 a week, much higher than the ‘ceiling’ referred to by the JEC in 2012/13 after the night of shame against Palace at the Amex.
Again the main reason for this increase compared to 2014 can be traced back to the increased academy and new training facilities costs.
Player stuff
One accusation that has been made at the club is that money wasn’t spent on new signings during 2014/15. This doesn’t seem to be the case though.
Sami Hyppia and Chris Hughton spent just over £3.3 million last season. Whilst the club are tight lipped about individual transfer fees, the total ties in roughly with the media quoted sums of Sam Baldock (£1.5 million), David Stockdale (£1 million), Chris OGrady (£500k), Beyam Kayal (£300k) and Adrian Colunga (€100k).
It also reinforces the view that the comments made by Colunga in the Argus, where he referred to being a recent €1.5 million signing, were a load of nonsense.
The figures from the previous season, where Oscar Garcia spent under a million pounds (presumably mainly on Dale Stephens), are perhaps more revealing, and may help explain his mysterious departure from the club after the playoff defeat to Derby.
A couple of figures may need further explanation. Player amortisation is accounting geek speak for how clubs deal with signings. If a player is signed (for say) for £2 million on a four year contract, then the club spreads the fee over the contract length as amortisation of £500,000 a year.
When it comes to player disposals the gain in the profit and loss account is calculated as the difference between the sum received for the player(s) and the value in the accounts, which is the cost less any amortisation charged.
Therefore in 2014/15 the club received £11.1 million in cash from the sales of Buckley and Ulloa, who were shown in the accounts at a cost of £4.7 million, less amortisation of £2.3 million. Put together 11.1-(4.7-2.3) ties into the gain on player sales of £8.7 million.
Further ferreting around in the back pages of the accounts reveals that we could receive another £2 million from transfers, presumably relating to Leo Ulloa at Leicester and Will Buckley at Sunderland. Whether this is in relation to number of appearances or both those clubs avoiding relegation is unclear.
Similarly the Albion may have to pay a further £2.3 million to other clubs if certain conditions are met, I suspect these may be appearance related.
FFP
Last year was the final year of the very tight FFP rules, where clubs were restricted to losses of £5 million.
The club say they were compliant with FFP, as the losses here don’t include depreciation (£4.9 million) and youth development/academy costs, which were estimated in 2013 to cost at least £1.5 million a year http://www.bbc.co.uk/sport/0/football/22293207 but realistically are going to be at least twice this amount for a club of the Albion’s size.
The club say they have ‘reluctantly’ agreed to an increase in the allowable FFP losses to £13 million from 2015/16, which is likely to equate to an accounting loss of at least £20 million.
This is to help narrow the gap between clubs such as the Albion who have been in the Championship for a few years and those that receive parachute payments.
Parachute payments are worth about £20 million a year under the existing TV contract, and will no doubt rise when the new BT/Sky deal starts in 2016/17.
My personal view is that FFP has huge flaws, as it equates profit, rather than cash, with financial survival and stability.
FFP is also open to abuse, as has been seen with QPR, who ran up a loss of £60 million in the Championship in 2013/14, and then applied creative accounting techniques that would have caused even the boys at Enron to raise a quizzical eyebrow.
The silence from the Football League in dealing with this issue (whilst happily handing out transfer embargoes to Forest, Leeds and Blackburn) suggests that the Football League is running scared of QPR’s (very expensive) lawyers.
Expect a cop out when (or should that be if) a final settlement of the FFP fine (which if the original principles of FFP were applied would be in the region of £50 million given to charity) is announced.
It does show however that the Albion’s commitment to FFP compliance has given them the platform to compete this season, unlike Leeds, Forest and Rovers.
Summary
Albion’s fourth season in the Championship shows that the division is a financial car crash.
The broadcast revenue attractions of being promoted to the Premier League have increased this season, hence we’ve seen the likes of Derby, Boro and Fulham going for broke in an attempt to secure promotion and be at the table when Sky and BT hand out a minimum of £99 million (effectively rising to £150 million when parachute payments are included) next season in TV money alone.
The Albion have been more modest in their outlay, but even so there have been significant sums paid for the likes of Hunemieir, Hemed and Murphy, along with paying Bobby Zamora a salary befitting a former Premier League player. Although the biggest deal in many ways was rejecting Fulham's £5 million plus bid for Lewis Dunk.
With this in mind, and assuming there are no major departures in January, I would anticipate the Albion’s losses rising in 2015/16.
Removing the likes of record signing CMS from the wage bill will help to a degree. Large transfer fees are usually complemented by large salaries. A £5 million signing would normally expect a salary of a million a year. Downing at 'Boro are reputed to be paying him £70,000 a week.
Blooming Marvelous
The Albion’s biggest strength is also the biggest weakness. Tony Bloom’s generosity has allowed the club to move to the level of being an established Championship club instead of a yo-yo existence.
Every Albion fan knows that Tony is a genuine fan, and for that we should consider ourselves to be very lucky.
However we’ve seen recently at Bolton what happens when a benefactor is either unable or unwilling to underwrite losses indefinitely. Should anything happen to TB then I shudder to think how long the club could continue incurring expenses at the present level.
Tony Bloom’s total investment is over £147 million in interest free loans (take note Greg Stanley) and about £69 million in shares, giving a total investment of about £217 million.
Any fan who thinks that TB is going to ‘cash in’ on this huge sum of money by selling the club to foreign investors is likely to be disappointed. There is little to be gained from selling out to American hedge or private equity funds.
Such investors would be looking for a return on their investment of at least 20% a year, given the level of risk involved, and therefore would want to make over £40 million a year in profits from their investment if they were to pay TB his £217 million.
Remember, every pound in profit taken out by such investors is a pound that is not spent on the footballing side of the club.
Palace have sold 70% and Bournemouth 25% of the club to such investors, who have no familiarity with the game, its history, heritage and place in the community.
The club is in a far better position in the hands of a genuine fan, although ultimately it is Tony Bloom’s company to do so as he wishes.
Total losses in the Championship are likely to top £250 million for 2014/15, and increase substantially in 2015/16 as the more relaxed attitude to FFP commences.
This contrasts with the profits now being made in the Premier League, although there are many established clubs in that division such as Chelsea and Everton that are still making losses. Manchester City only make a ‘profit’ due to some very lucrative commercial deals with parties that are connected to the club owners.
With the team’s incredible unbeaten run meaning that promotion is in everyone’s thoughts, the January transfer window could be make or break.
If you had an approximately 1 in 3 chance of a £150 million plus lottery ticket win, how much would you be prepared to pay for a ticket?
Don’t be surprised (and this ties in with what NSC and Andy Naylor have been saying for some time) if the transfer record is broken in an attempt to improve the chances of promotion.
TB’s comments seem to echo the view that the club will invest in new players in January.
At times in life you have to know when to stick or twist. If only we had a chairman who was an expert at calculating the odds……………
How much for a seat?
A couple of weeks ago the Albion announced their financial results, and confirmed a loss of £10.4 million for the year to 30 June 2015, a slight improvement on the previous year.
The news has been followed by a release that the club are potentially increasing ST prices by a couple of pounds of month for early bird renewers. This has been met with a mainly positive response from NSC.
The recently released accounts however reveal that for one fan the price of a home ticket last season was an eye-watering £453,856.52.
That fan is of course the one and only Tony Bloom. I suspect for his matchday price he probably received a free Bovril, programme and a booster cushion, but even so it shows just how dependent the club are on his benevolence and interest free support for the club.
The accounts have already been reviewed by the king of football analysis in the Swiss Ramble blog, but I’ve played around with the numbers a bit more since then, so have highlighted some other issues.
Where does the money come from?
Football clubs broadly get their sales income from three sources, fans, sponsors and TV. In the Premier League TV income for a small club such as Crystal Palace or Crystal Palace can be up to 90% of total income, but in the Championship clubs are far more dependent on other sources.
An analysis of the Albion since moving to ‘The’ Amex shows:
Fan income
The first thing to note is the far bigger impact that fan contributions have on club finances in the Championship, with over half the total income coming from that area.
What is also noticeable that the frankly rubbish football that was on display last season had a negative impact on attendance income (down over half a million pounds) as average attendances fell by about 1,500.
On top of that retail income fell by a greater proportion, which, considering the new kit deal with Nike kicked in, was surprising.
However, the lack of success on the pitch last season, (remember the first match where our strike force was Fenelon and O’Grady) meant that the initial enthusiasm for Nike replica kits soon waned.
I’m hoping however that as the Nike deal was a new one that the club may have been making better profit margins on merchandise, which will counterbalance the decrease in sales.
Catering income fell disproportionately compared to ticket income. There were some grumbles in relation to issues with caterers, but also because the club didn’t host any concerts, unlike in 2014 when Rod Stewart’s croaking in the summer had everyone rushing for a pie and half a dozen pints.
The club hierarchy are keen to maximise the income generated, which makes sense given that there the stadium hardly generates any money for 340 days a year on non-matchdays.
This is why activities such as the planned hotel could be useful, as it will provide all year income.
Commercial Income
Here the club have done extremely well. An increase of over half a million quid is a considerable achievement in getting sponsors interested in the Albion.
Certainly having the Amex in its splendour helps impress commercial sponsors.
The Rugby World Cup weekend this season may have helped the club in this regard too this season and beyond, as the Japan v Saffers result, and the accompanying publicity, have enhanced the reputation of the Amex.
Costs
Running a football club, especially in a state of the art stadium such as the Amex, is a costly business.
The Albion use their own metrics and subtract non-football expenses from total income to work out a pre-football profit figure.
The calculation of this figure seems to have been tweaked a bit in the four years at the Amex as new people have come in, so I have tried to back out some numbers to achieve consistency from season to season over the four Amex years.
One thing that is very striking is the huge efforts to cut the non-football costs. There have been many tales of poor cost control when the initial move to the Amex occurred, and this has been a painful exercise in identifying where the excesses arose.
It’s to the credit of Paul Barber and his team that this has been addressed, as the less money wasted on non-football matters means there is more available on the playing budget.
Some non-football costs are unique to the Albion (transport, wi-fi, real ale etc.), which explains why it still costs more nearly £12 million to run the club from a non-football perspective.
The scope for further cost-cutting in the non-football area is probably limited though, so I don’t see much scope for this falling in future years, and giving the manager additional funds to invest in player transfers and wages.
Football costs rose significantly in 2014/15. A major factor in this is the opening of the Lancing training facility and the costs of running a Grade 1 Academy.
David Burke came in for a lot of stick last season for his signings and reliance on loan players (rightly so, although some have made huge improvements this season), but it was an excellent achievement to achieve Grade 1 status.
Whilst the club receive a greater grant for running Grade 1, it comes a long way off covering the costs of the Academy.
Lancing and the Academy also explain why employee numbers have risen. To obtain Grade 1 status there are strict criteria governing the number of coaches, mentors, physios etc. for Academy trainees. The numbers below don't include match day staff, but do show the Albion is now a major private sector employer in Brighton.
Wages are a scary 87% of total income, it is little consolation that other clubs in this division have an even worse ratio in this regard (some have been as high as 170%). What this means is that for every £100 that the club generates in revenue, £87 goes out in wages.
I’ve rearranged the numbers in the accounts to calculate the following expense analysis.
If my figures are correct, (and I’m the first to admit I may have made some errors) then the total costs of running the club rose substantially compared to 2014 from £38.5 million to £42.9 million. This works out as over £820,000 a week, much higher than the ‘ceiling’ referred to by the JEC in 2012/13 after the night of shame against Palace at the Amex.
Again the main reason for this increase compared to 2014 can be traced back to the increased academy and new training facilities costs.
Player stuff
One accusation that has been made at the club is that money wasn’t spent on new signings during 2014/15. This doesn’t seem to be the case though.
Sami Hyppia and Chris Hughton spent just over £3.3 million last season. Whilst the club are tight lipped about individual transfer fees, the total ties in roughly with the media quoted sums of Sam Baldock (£1.5 million), David Stockdale (£1 million), Chris OGrady (£500k), Beyam Kayal (£300k) and Adrian Colunga (€100k).
It also reinforces the view that the comments made by Colunga in the Argus, where he referred to being a recent €1.5 million signing, were a load of nonsense.
The figures from the previous season, where Oscar Garcia spent under a million pounds (presumably mainly on Dale Stephens), are perhaps more revealing, and may help explain his mysterious departure from the club after the playoff defeat to Derby.
A couple of figures may need further explanation. Player amortisation is accounting geek speak for how clubs deal with signings. If a player is signed (for say) for £2 million on a four year contract, then the club spreads the fee over the contract length as amortisation of £500,000 a year.
When it comes to player disposals the gain in the profit and loss account is calculated as the difference between the sum received for the player(s) and the value in the accounts, which is the cost less any amortisation charged.
Therefore in 2014/15 the club received £11.1 million in cash from the sales of Buckley and Ulloa, who were shown in the accounts at a cost of £4.7 million, less amortisation of £2.3 million. Put together 11.1-(4.7-2.3) ties into the gain on player sales of £8.7 million.
Further ferreting around in the back pages of the accounts reveals that we could receive another £2 million from transfers, presumably relating to Leo Ulloa at Leicester and Will Buckley at Sunderland. Whether this is in relation to number of appearances or both those clubs avoiding relegation is unclear.
Similarly the Albion may have to pay a further £2.3 million to other clubs if certain conditions are met, I suspect these may be appearance related.
FFP
Last year was the final year of the very tight FFP rules, where clubs were restricted to losses of £5 million.
The club say they were compliant with FFP, as the losses here don’t include depreciation (£4.9 million) and youth development/academy costs, which were estimated in 2013 to cost at least £1.5 million a year http://www.bbc.co.uk/sport/0/football/22293207 but realistically are going to be at least twice this amount for a club of the Albion’s size.
The club say they have ‘reluctantly’ agreed to an increase in the allowable FFP losses to £13 million from 2015/16, which is likely to equate to an accounting loss of at least £20 million.
This is to help narrow the gap between clubs such as the Albion who have been in the Championship for a few years and those that receive parachute payments.
Parachute payments are worth about £20 million a year under the existing TV contract, and will no doubt rise when the new BT/Sky deal starts in 2016/17.
My personal view is that FFP has huge flaws, as it equates profit, rather than cash, with financial survival and stability.
FFP is also open to abuse, as has been seen with QPR, who ran up a loss of £60 million in the Championship in 2013/14, and then applied creative accounting techniques that would have caused even the boys at Enron to raise a quizzical eyebrow.
The silence from the Football League in dealing with this issue (whilst happily handing out transfer embargoes to Forest, Leeds and Blackburn) suggests that the Football League is running scared of QPR’s (very expensive) lawyers.
Expect a cop out when (or should that be if) a final settlement of the FFP fine (which if the original principles of FFP were applied would be in the region of £50 million given to charity) is announced.
It does show however that the Albion’s commitment to FFP compliance has given them the platform to compete this season, unlike Leeds, Forest and Rovers.
Summary
Albion’s fourth season in the Championship shows that the division is a financial car crash.
The broadcast revenue attractions of being promoted to the Premier League have increased this season, hence we’ve seen the likes of Derby, Boro and Fulham going for broke in an attempt to secure promotion and be at the table when Sky and BT hand out a minimum of £99 million (effectively rising to £150 million when parachute payments are included) next season in TV money alone.
The Albion have been more modest in their outlay, but even so there have been significant sums paid for the likes of Hunemieir, Hemed and Murphy, along with paying Bobby Zamora a salary befitting a former Premier League player. Although the biggest deal in many ways was rejecting Fulham's £5 million plus bid for Lewis Dunk.
With this in mind, and assuming there are no major departures in January, I would anticipate the Albion’s losses rising in 2015/16.
Removing the likes of record signing CMS from the wage bill will help to a degree. Large transfer fees are usually complemented by large salaries. A £5 million signing would normally expect a salary of a million a year. Downing at 'Boro are reputed to be paying him £70,000 a week.
Blooming Marvelous
The Albion’s biggest strength is also the biggest weakness. Tony Bloom’s generosity has allowed the club to move to the level of being an established Championship club instead of a yo-yo existence.
Every Albion fan knows that Tony is a genuine fan, and for that we should consider ourselves to be very lucky.
However we’ve seen recently at Bolton what happens when a benefactor is either unable or unwilling to underwrite losses indefinitely. Should anything happen to TB then I shudder to think how long the club could continue incurring expenses at the present level.
Tony Bloom’s total investment is over £147 million in interest free loans (take note Greg Stanley) and about £69 million in shares, giving a total investment of about £217 million.
Any fan who thinks that TB is going to ‘cash in’ on this huge sum of money by selling the club to foreign investors is likely to be disappointed. There is little to be gained from selling out to American hedge or private equity funds.
Such investors would be looking for a return on their investment of at least 20% a year, given the level of risk involved, and therefore would want to make over £40 million a year in profits from their investment if they were to pay TB his £217 million.
Remember, every pound in profit taken out by such investors is a pound that is not spent on the footballing side of the club.
Palace have sold 70% and Bournemouth 25% of the club to such investors, who have no familiarity with the game, its history, heritage and place in the community.
The club is in a far better position in the hands of a genuine fan, although ultimately it is Tony Bloom’s company to do so as he wishes.
Total losses in the Championship are likely to top £250 million for 2014/15, and increase substantially in 2015/16 as the more relaxed attitude to FFP commences.
This contrasts with the profits now being made in the Premier League, although there are many established clubs in that division such as Chelsea and Everton that are still making losses. Manchester City only make a ‘profit’ due to some very lucrative commercial deals with parties that are connected to the club owners.
With the team’s incredible unbeaten run meaning that promotion is in everyone’s thoughts, the January transfer window could be make or break.
If you had an approximately 1 in 3 chance of a £150 million plus lottery ticket win, how much would you be prepared to pay for a ticket?
Don’t be surprised (and this ties in with what NSC and Andy Naylor have been saying for some time) if the transfer record is broken in an attempt to improve the chances of promotion.
TB’s comments seem to echo the view that the club will invest in new players in January.
At times in life you have to know when to stick or twist. If only we had a chairman who was an expert at calculating the odds……………
