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DanFromDownSouth

Boro's 2018-2019 Season Financial Accounts

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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.

❤️

 


 

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Excellent Dan. I wouldn’t be too well up on that stuff but you explained it very well. 

Another big splurge on the way as typical Boro boom and bust our way along every couple of seasons 😂

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Thanks for the detailed input DanFromDownSouth. I really appreciate input from members with knowledge in niche areas such as you in accountancy. It’s particularly welcome considering Boro fans collective concerns regarding the level of genuine scrutiny that local media like the Evening Gazette and BBC Tees can put upon Boro due to them being pressured into toeing the party line.

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I disagree about the FFP position, I don't think that's going to be much of an issue at all.  I reckon we'll spend a bit in the summer.

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8 minutes ago, Changing Times said:

I disagree about the FFP position, I don't think that's going to be much of an issue at all.  I reckon we'll spend a bit in the summer.

I don't think we will be at risk of breaching it. But was more trying to highlight that we will need to be very wary of the limit as I believe we will post a big loss for the current season.

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5 minutes ago, DanFromDownSouth said:

I don't think we will be at risk of breaching it. But was more trying to highlight that we will need to be very wary of the limit as I believe we will post a big loss for the current season.

I don't think it will be close to the limit although this virus stuff could complicate matters as I expected us to sell a couple of players in the summer and this might be delayed until after July.  I reckon without sales that we're talking about £15m-£20m loss, which is far from ideal but fine for FFP purposes.  

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6 minutes ago, Changing Times said:

I don't think it will be close to the limit although this virus stuff could complicate matters as I expected us to sell a couple of players in the summer and this might be delayed until after July.  I reckon without sales that we're talking about £15m-£20m loss, which is far from ideal but fine for FFP purposes.  

I think for the 2019/20 season we are looking at a loss of £25-30 Million.

The Gazette put an article out saying the wage bill is estimated at £22 Million and turnover a similar figure. They also mentioned that the general running cost of the club is about £12 Million. I'd also point out that for this season I doubt we are even close to making £30 million on profit on the sale of registrations, like we did in 2018/19, I reckon between £10-15 million is fair.

That's puts the loss somewhere between the £27-32 million mark. Obviously the amortisation figure will drop, which will lower the amount of loss, but we have admin expenses to consider too. 

I don't think things are bleak, but I do think we'll have another season of relative belt tightening. 

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Excellent analysis, thanks Dan

Is there anything in the accounts about staff costs? For example the turnover between Monk and Pulis? Or any ongoing payments to AK & co? 

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8 minutes ago, boroie said:

Excellent analysis, thanks Dan

Is there anything in the accounts about staff costs? For example the turnover between Monk and Pulis? Or any ongoing payments to AK & co? 

Thank you. In terms of any compensation payments for Monk, they would have been included in the 2017-2018 period (the last set of accounts). Without knowing how MFC classify transactions, I imagine it would have been included in Wages and Salaries. 

If I recall correctly I'm sure the accounts filed for 2016-2017 made reference to paying Aitor compensation.

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Must have took time to put that together. Very well expained. Great job.

So we are not totally broke (yet) but certainly cannot afford anymore flop signings.

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1 hour ago, DanFromDownSouth said:

I think for the 2019/20 season we are looking at a loss of £25-30 Million.

The Gazette put an article out saying the wage bill is estimated at £22 Million and turnover a similar figure. They also mentioned that the general running cost of the club is about £12 Million. I'd also point out that for this season I doubt we are even close to making £30 million on profit on the sale of registrations, like we did in 2018/19, I reckon between £10-15 million is fair.

That's puts the loss somewhere between the £27-32 million mark. Obviously the amortisation figure will drop, which will lower the amount of loss, but we have admin expenses to consider too. 

I don't think things are bleak, but I do think we'll have another season of relative belt tightening. 

I guess we'll see but I think the loss will be lower anyway and I expect us to be spending again this summer, whenever the window opens.

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3 minutes ago, Changing Times said:

I guess we'll see but I think the loss will be lower anyway and I expect us to be spending again this summer, whenever the window opens.

This is all it is at the moment. As I'm not privvy to the actual ins and outs of this seasons accounts. Just have to wait another 12 months to actually know for certain. I expect to us to spend too, just think the days of spending millions hand over fist on players is behind us (for at least another season or 2, until we go for out boom or bust phase again).

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16 minutes ago, DanFromDownSouth said:

This is all it is at the moment. As I'm not privvy to the actual ins and outs of this seasons accounts. Just have to wait another 12 months to actually know for certain. I expect to us to spend too, just think the days of spending millions hand over fist on players is behind us (for at least another season or 2, until we go for out boom or bust phase again).

Oh yeah, it will be spending in a different way to a couple of years ago but I suspect we'll move for Gibson again and get it done this time as well trying to get Moukoudi.  I'd also expect us to sign another couple of players at least.

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4 hours ago, DanFromDownSouth said:

Thank you. In terms of any compensation payments for Monk, they would have been included in the 2017-2018 period (the last set of accounts). Without knowing how MFC classify transactions, I imagine it would have been included in Wages and Salaries. 

If I recall correctly I'm sure the accounts filed for 2016-2017 made reference to paying Aitor compensation.

Thanks for the explanation, I didn't know when they would put those expenses in. Cheers for taking the time to go through the accounts!

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Posted (edited)
7 hours ago, DanFromDownSouth said:

This is all it is at the moment. As I'm not privvy to the actual ins and outs of this seasons accounts. Just have to wait another 12 months to actually know for certain. I expect to us to spend too, just think the days of spending millions hand over fist on players is behind us (for at least another season or 2, until we go for out boom or bust phase again).

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. 

Edited by sackrobson2

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