Thread by @SwissRamble

Leeds United’s 2017/18 accounts covered the first season under owner Andrea Radrizzani, when they finished a “disappointing” 13th in the Championship, sacking two head coaches (Thomas Christiansen & Paul Heckingbottom), before appointing Marcelo Bielsa. Some thoughts follow #LUFC

#LUFC posted a £4.3m loss, compared to a £1.0m profit the previous season, despite revenue growing £6.6m (19%) from £34.1m to £40.7m and profit on player sales doubling from £9m to £18m, due to “investment in both player registrations and salaries and scouting expenses”.

The main reason for #LUFC £6.6m revenue growth was a £5.5m (33%) increase in commercial income to £21.8m (catering, merchandising and the Selby-Warrington boxing fight), though gate receipts also rose £1.1m (11%) to £11.3m. Broadcasting was flat at £7.7m.

The revenue increase was more than offset by #LUFC cost growth, as wages surged £10.6m (51%) to £31.4m, player amortisation/impairment increased £3.3m to £8.9m and other expenses were up £3.8m to £19.4m. Net interest went from £1.2m receivable to £1.7m payable, a £2.9m swing.

As Radrizzani said, “It is not sustainable to stay in the Championship.” Almost all clubs lose money with only 5 profitable, so #LUFC £4m loss is one of the smallest in 2017/18. The 3 biggest losses (#WWFC £57m, #FFC £45m & Cardiff £37m) were driven by hefty promotion bonuses.

#LUFC loss would have been higher without £18m profit on player sales, mainly arising from Chris Wood’s move to Burnley. This was the third highest in the Championship, only behind the large profits made by two clubs relegated from the Premier League, #NCFC £48m and #hcafc £31m.

#LUFC have only made money once in last 6 years (and that was just £1m in 2016/17), though losses have significantly improved since the £20m reported in 2013/14. Following the investment in Bielsa, his coaching team and the squad, the 2018/19 loss is likely to be much higher.

Improvement in #LUFC finances is partly due to profit on player sales, averaging £10m over last 4 seasons. As Radrizzani explained, “Unfortunately to sustain a club in this league we need to sell one or two players each year.” 2018/19 will include Ronaldo Vieira to Sampdoria.

#LUFC EBITDA (Earnings Before Interest, Depreciation and Amortisation), which strips out player sales and non-cash items to give underlying profitability, declined from £(2)m to £(10)m, though not quite as low as £(13)m in 2014.

In fairness, only four Championship clubs have managed to achieve positive EBITDA in 2017/18, so #LUFC £(10)m is actually in the top half of the division. For some context, it’s still a fair bit better than clubs like #BCFC £(30)m, #AVFC £(27)m and #WWFC £(27)m.

#LUFC revenue has grown by an impressive £16.3m (67%) in last 3 years from £24.4m to £40.7m, though £5.2m was due to bringing catering back in-house. Other commercial up £5.3m, TV £3.3m & gate receipts £2.5m. Should further increase in 2018/19 (higher crowds, merchandising, etc).

#LUFC £41m revenue is currently 5th highest in the Championship in 2017/18 (still awaiting Sunderland accounts), though significantly lower than four clubs benefiting from parachute payments: #AVFC £69m, #Boro £62m, #NCFC £62m & #hcafc £56m.

Championship revenue is hugely influenced by Premier League parachute payments with #Boro, #hcafc and #SAFC leading the way with £42m, followed by #AVFC and #NCFC £34m. Radrizzani complained, “These mean some have much bigger budgets and it’s very difficult to compete.”

In fact, if parachute payments were excluded, #LUFC would have the highest revenue in the Championship with their £41m just above #AVFC £39m, but far ahead of #NCFC £32m and #DCFC £30m.

#LUFC TV income was flat at £7.7m. Most Championship clubs receive £7-8m TV money, including £2.3m EFL distribution and £4.5m PL solidarity payment. Leeds benefited from being shown live 20 times, but the sums involved are not that much: £100k home game, £10k away.

This is in stark contrast to TV money in the Premier League where clubs receive £95m to £150m. Radrizzani is unhappy with #LUFC distribution, “It’s difficult to be in a league where we make losses, because there is not enough income generated from media rights.”

#LUFC gate receipts increased £1.1m (11%) to £11.3m, as average attendance grew from 27,698 to 31,521. This was the 2nd highest match day income in Championship, only below # #AVFC £11.8m, and Leeds’ highest for this revenue stream since £11.6m in 2011/12.

The “improvement in fan sentiment” was responsible for #LUFC higher attendances, which have risen by 8,000 since 2016 to 31,500, including the highest .season ticket sales for 15 years. In fact, crowds have further increased this season and are currently averaging over 40,000.

#LUFC 2017/18 attendance of 31,525 was not only the 2nd highest in the Championship, only below #AVFC 32,097, but it was also above half the clubs in the Premier League. They have recently announced a season ticket price freeze for 2019/20, the eighth year in a row.

#LUFC commercial income rose £5.5m (33%) to £21.8m, comprising merchandising £6.2m (up £0.9m, impact of Merrion Centre store), catering £6.2m (up £1.3m) & other revenue £9.9m (up £3.2m including Selby-Warrington boxing fight). By far highest in Championship, ahead of #AVFC £13m.

#LUFC shirt sponsor, 32Red, signed a 3-year deal in 2016, while Clipper are the club’s secondary sponsor (back of shirt and shorts). Kappa have a 5-year kit supplier agreement that started 2015/16.

#LUFC wage bill increased significantly by £10.6m (51%) to £31.4m, including £830k redundancy payments, “to ensure we created the foundation of a squad that could effectively compete for promotion over the medium term.” Will further increase in 2018/19 due to the Bielsa factor.

Despite the growth #LUFC £31m wage bill was only 10th highest in the Championship, way behind #AVFC £73m, #FFC £54m, #WWFC £51m, #Boro £49m & Cardiff £48m. The 3 promoted clubs include substantial promotion bonuses. The huge gap underlines Leeds’ competitive challenge.

On the one hand, #LUFC £31m wage bill is the 10th highest ever in the Championship for clubs not receiving parachute payments, but on the other hand, four of those came last season (#WWFC £51m, #DCFC £40m, #BCFC £39m and Reading £35m), highlighting the challenge.

#LUFC wages to turnover ratio increased from 61% to 77%, but this was still one of the lowest in the Championship. This is some achievement, given that over half the clubs in this division have a ratio over 100% with #BCFC leading the way with a scarcely credible 202%.

#LUFC directors increased from zero to £212k, though this is still a long way short of the recent peak of £794,000 in 2013 during the Ken Bates/David Haigh era.

Unlike wages, #LUFC £19m other expenses were one of highest in Championship, only behind #AVFC £23m & #WWFC £22m. This would have been even higher without Radrizzani buying back Elland Road in June 2017, leased until 2032 and rent-free for 33 months.

#LUFC player amortisation, the annual charge to write-down transfer fees over the life of a player’s contract, has risen steadily from £1.0m in 2010 to £8.1m in 2018, reflecting increased transfer spend. Also £2.5m of impairment (write-down of player values) in the last 5 years.

Following this growth, #LUFC £8m player amortisation is in the top ten in the Championship, though it is still only a third of (relatively) big-spending clubs like #Boro and #AVFC, both £24m.

#LUFC player purchases increased from £7m to £28m (including Forshaw, Jansson, Saiz, Roberts, Alioski, Klich & Sacko), which was as much as previous 6 years combined. Third highest in the Championship, but less than half of #Boro’s £66m.

Radrizzani has loosened the purse strings since his arrival at #LUFC, averaging £18m gross spend in the last 2 years, considerably more than the £3m average over the previous 9 years. 2018/19 includes £10m expenditure on Patrick Bamford from #Boro and Barry Douglas from #WWFC.

#LUFC gross debt fell from £25.2m to £21.5m, including £7.2m from Radrizzani, £12.6m unspecified other loans and £1.7m finance leases. Figure would have been higher without the owner converting £8.8m of debt to capital, making £20.3m in last 4 years.

#LUFC £21m debt was among the lowest in the Championship, where 6 clubs are above £70m, including #Boro £101m, #ITFC £95m and #WWFC £75m. They do owe £12.3m in transfer fees, but are also owed £11.5m by other clubs.

Although debt is high in the Championship, most of it is provided by owners who charge little or no interest. However, #LUFC are charged 4% + 3 month LIBOR, resulting in £430k interest payments in 2017/18, the 8th highest in the division.

Interestingly, #LUFC have revealed that promotion to the Premier League would cost them £25m (£18m bonus payments and £7m additional transfer fees). This is in line with the amounts paid by recently promoted clubs.

#LUFC accounts also note that there are a number of legal claims outstanding against the company, without quantifying the potential cost. In addition, the club is pursuing a debt of £2m, though this is expected to be recovered.

#LUFC lost £8m cash from operations in 2017/18, then spent £3m on players (net) and £3m on infrastructure (stadium refurbishment). Largely funded by £11m share issue for a minority stake bought by 49ers Enterprises (San Francisco 49ers investment arm) and £2m additional loans.

In the last decade #LUFC received £62m funding from owners (£32m share capital & £30m loans) and made £5m from (net) player sales. This has mainly been spent on funding operating losses £28m, capital expenditure £23m and loan repayments, interest and dividends £14m.

Although #LUFC suffered a transfer embargo in 2015 for breaching FFP rules, they are now comfortably within the £39m maximum loss over the 3-year monitoring period ending in 2017/18, even before deducting allowable expenses for academy, community & infrastructure (£3m a year).

To date Radrizzani has been a good owner at #LUFC, buying back the ground and investing significantly more in the squad. However, it remains to be seen whether he is in it for the long-term, if Leeds fail to win promotion, especially given the issues at his company Eleven Sports.

Under previous owners #LUFC have adopted a very conservative strategy that has made it difficult for the club to compete. They are now spending much more than before, which gives them a better chance, though they are (financially) still way behind clubs with parachute payments.