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Boro's 2018-2019 Season Financial Accounts


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5 hours ago, sackrobson2 said:

So in summary we are fine this year due to us not really using the losses over the last two years but if we have higher losses going forward then in two years we could be in trouble. But at least this gives us time to adjust or preferably get promoted

goodfellas GIF

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On 3/13/2020 at 6:00 PM, DanFromDownSouth said:

Good Afternoon Ladies and Gentlemen, I have finally had some time to have a really good look at our financial accounts for the period upto June 2019 (The 2018-2019 season).
As a word of warning this will be a post that is very number heavy. I apprieciate this will not be a thread that is everyone's cup of tea, but as far as I am aware, no-one has a gun to your head making you read this. 

The Facts:

Turnover: In the latest figures released for the 2018/2019 season turnover was £55,643,000. Compare that to the 2017/2018 season's figure of £61,996,000, we have a decrease of 10.25%.
*Cost of Sales: Our figures for the 2018/2019 season haven't really changed all that much compared to the 2017/2018 season (they actually increased by less than 1%). This is a little concerning as you'd expect a business to cut costs to fall in line with a reduction in turnover. I'll look at the wages aspect of this in more detail, but because there is not breakdown in expenses (like the turnover), it would be pure guess work as to why our cost of sales has remained high.
Admin Expenses (Including **Amortisation): For the 2018/2019 season total admin expense was  £34,233,000. Compare that to the 2017/2018 season's figure of £30,982,000, we have a increase in admin expenses of 10.49%. So turnover has dropped by 10% and admin expenses have increased by 10%, so far things aren't looking great.
Profit on Sale of Registrations: This is effectively the profit we have made on selling players, but it is a little more complicated. At the time of sale a player will have a net book value - NBV for short (this is going back to amortisation). If a player has a NBV of £1,000,000 and we sell him for £2,000,000, we will record this as £1,000,000 and then wipe the NBV off the accounts (I'll look at this later on). For the 2018/2019 season this figure was £33,225,000, compare that to the 2017/2018 season's figure of £15,335,000, and we have doubled the money made. This £17,890,000 increase from last year has more than made up for the £6,353,000 drop in turnover and £3,251,000 increase in admin expenses.
Profit/(Loss) before Taxation: All the above factors including a few of the omitted items (Other operating income and interest payable) lead us to ending up with a profit for the year of £2,012,000. Compared to last year's figures of a loss of £6,396,000, this is a good result financially.

Further Breakdown of Figures:

Turnover (Detailed): Looking at the turnover breakdown for the 2018/19 season, all areas of turnover decreased compare to the 2017/18 season (with exception of Sponsorship and Competition money, which actually increased). Income from gate receipts dropped by 14.89% (Probably due to not having a play-off game, like the season before, and also the attendances dropping) and merchandising was down by 11% also. Broadcasting income was down by 12.21% (£5,652,000), this was mainly due to our parachute payments reducing from £41,600,000 in the 2017/18 season to £34,900,000 for the 2018/19 season.
Wages and Salaries: Wages and Salaries are included in the cost of sales figure, but I think it is important to seperate them out. In the 2017/18 season our Staff costs (Including Social Security and pension costs) were £48,707,000. For the 2018/19 season they were reduced by 17.62% to a figure of £40,125,000. Between the beginning of July 2018 and the end of June 2019 we saw the following first teamers leave; Barrangan, Cranie, Mejias, Fabio, Bamford, Gibson, Traore, De Sart, Ripley and Leadbitter. We also brought in the following first teamers; Flint, McNair, Saville, Mikel, Hugill, Besic, Batth, Mcqueen and La Parra. Those player movements allowed us to reduce the wage bill by £8,582,000.

*Cost of Sales - This figure will normally include any cost that is directly contributed to making a "sale". In a manufactoring business this will include, direct labour and raw materials. For us management staff and player wages will be included in this figure.
**Amortisation in this sense is the original transfer fee for a player split evenly over the years of their contract. For example Saville was signed for £8,000,000 on a 4 year deal. Each accounting year will include £2,000,000 (£8,000,000 / 4) worth of amortisation for him. Saville's NBV will decrease for each passing year.

 1204121547_SavilleNBV.jpg.6ad3fdf36b5844c61067bccb8f9cbf49.jpg

 

Analysis:

Turnover: For the 2019/2020 season our turnover is going to drop by a huge amount. We will no longer have any parachute payments, so we are looking at taking away £34,900,000 from the turnover for 2018/2019. Plus if our average attendance drops this season we are going to see a drop in gate receipts. This is before we factor in the relatively new prospect of the rest of this season being postponed and or scrapped entirely. As an estimate I'm expecting to see us with a turnover of between £20,000,000 - £25,000,000.
Cost of Sales (Wages): With our transfer activity and our player turnover, I would expect that our wage bill will drop off considerably in the 2019/2020 season. I wouldn't be surprised to see it drop down to a similar level to our (estimate 2019/20) turnover. Between July 2019 and June 2020 we have seen the following first team players leave; Downing, Dimi, Braithwaite, Randolph, Flint, Mikel, Hugill, Besic, Batth, Mcqueen and La Parra. Plus any players that leave this summer will also reduce the wage costs, but that won't be fully reflected until the set of accounts that covers the 2020/2021 season.
Admin Expenses (Including **Amortisation): I would, like the wages, expect this figure to also drop in the next set of accounts due to us being able to remove amortisation for players we no longer have. This will help to reduce our expenses in the accounts and thus will have a direct impact the end profit/(loss) figure in the next set of accounts.
Profit on Sale of Registrations: This figure is also something that has a big impact on our profit/(loss) figure for the end of the year. I expect in the next set of accounts that this figure is considerably lower than the current figure. Mainly due to us not getting 8 figure fees for players like we did in the 2018/2019 season, but also due to certain players having a similar NBV to what we sold them for (Flint and Braitwaite IMO). Compare this to us selling Gibson for £15,000,000 with him having no NBV in return (due to us not paying any transfer fee for him). His transfer would contribute £15,000,000 in profit.

What does this mean for FFP (Profit and Sustainability)?
FFP is judged on a 3 year rolling basis, so the 2017/2018, 2018/2019 and the 2019/2020 seasons, will all be included in the 3 year rolling assessment. So in the 2017/2018 we made a lost of £6,396,000, but then in 2018/2019 we made a profit of £2,012,000, so we have a net loss of £4,384,000. This looks good for the first 2 seasons in the assessment as we are permitted to lose upto £39,000,000 over the 3 seasons. As it stands we can afford to post a loss of £34,616,000 for the 2019/2020 season, without running the risk of being punished.
But remember FFP is a rolling assessment, so once the new season 2020/2021 starts we will be judged on the results from 2018/2019 (Profit of £2,012,000), the 2019/2020 season (loss of upto £34,616,000) and the 2020/2021 season. We would only be allowed to lose upto £6,396,000 in the 2020/2021 season, before hitting the £39,000,000 limit. This is where in my opinion the club will potentially struggle, we are really trying to cut costs this season so that we have some leeway (in terms of profit/(loss)) so that in future assessments we are able to post losses without the risk of punishment.
Just to add to this, those figures i've posted in regards to the FFP section, will change as there are exemptions to certain expenses in the FFP rules. So potentially the profit that is stated in the accounts, will be a higher figure when used for FFP as we can remove certain expenses (like academy costs) for FFP, but we can't remove them for accounting practices.

Anyone that reads this far well done. Took me a little time to compose, but if anyone has any questions feel free to ask.

❤️

 


 

Thanks for taking the time to do this. 👍

But could you give your own assessment of the club's financial situation, based on this info (for the benefit of us dummies who don't really understand accountancy)? Nothing too detailed...just more like - how deep in the brown stuff are we?

You mentioned your concerns over the club's ability to fall within the acceptable losses. Would this result in additional penalties, or would we face sanctions similar to Chelsea (i.e. unable to make new signings etc.)? Or did you mean that if we did take measures to curb our losses sufficiently, it would leave us struggling on other fronts?

 

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9 minutes ago, Maccarone said:

We will need our £50 million young talent to come good! don't we have to become a selling club to survive? Am I being too simplistic? 

Think it could be more like Norwich (Maddison & Murphys) were we need to sell some now for big money, so we don't have to sell the ones that come after.

 

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On 3/16/2020 at 9:46 AM, AnglianRed said:

Thanks for taking the time to do this. 👍

But could you give your own assessment of the club's financial situation, based on this info (for the benefit of us dummies who don't really understand accountancy)? Nothing too detailed...just more like - how deep in the brown stuff are we?

You mentioned your concerns over the club's ability to fall within the acceptable losses. Would this result in additional penalties, or would we face sanctions similar to Chelsea (i.e. unable to make new signings etc.)? Or did you mean that if we did take measures to curb our losses sufficiently, it would leave us struggling on other fronts?

 

In my opinion, from a normal business point of view, the club is in a bit of financial trouble, as we have only posted profit in 2 seasons since 2011. But we are talking about the football industry, where running at a loss each season is "Normal", so normal business practice doesn't always couple up.

Personally in terms of FFP I don't think we will be sanctioned for our 3 year period since relegation, but I do think we will end up posting a big loss in this season. Which will have a big impact on what we can afford to spend on player transfers and wages (and what we can afford to lose) on the next 2 seasons after this current one. What @estonpidge has suggested is for me the most likely outcome over the next 2 seasons, we may need to sell 1/2 promising young players in the 2020/2021 season and the season after that to reduce our losses.

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