Thread by @SwissRamble

Leicester City’s 2018/19 financial results covered a season when they finished 9th in the Premier League for the second year in a row. Brendan Rodgers replaced Claude Puel as manager in February. Some thoughts in the following thread #LCFC

Despite the tragic loss of club chairman, Vichai Srivaddhanaprabha, in a helicopter accident in October 2018, #LCFC have made great progress since King Power International acquired the club in 2010 with “a renewed commitment to investing growing revenues back into the club.”

#LCFC went from £2m profit before tax to a £20m loss, even though revenue rose £20m (12%) to £178m and profit on player sales was up £20m to £58m, as costs grew £61m, due to investment in the squad and the “transfer fee” for Brendan Rodgers. After tax, club posted a £17m loss.

All three #LCFC revenue streams were higher, but the majority of the £20m growth came from commercial, which rose £14m (65%) to £36m, due to sponsorship agreements. Broadcasting was up £4m (3%) to £128m, while gate receipts increased £2m (14%) to £15m.

The extent of #LCFC investment into the squad was seen by wages rising £31m (26%) to £150m and player amortisation up £16m (32%) to £64m. Other expenses surged £13m (59%) to £36m, probably due to the reported £9m cost of bringing in Rodgers and his staff from Celtic.

#LCFC £20m loss is clearly not great, but to put this into perspective, half of the 12 Premier League clubs that have so far published 2018/19 accounts have lost money. In fact, Leicester’s loss is the smallest reported, significantly better than #EFC and #CFC (both above £100m).

That said, #LCFC figures significantly benefited from profit on player sales increasing from £38m to £58m, mainly Riyad Mahrez to #MCFC and Ahmed Musa to Saudi Arabian side Al-Nassr. To date, in 2018/19 only #CFC have a higher profit than Leicester with £60m.

Following promotion to the Premier League, #LCFC delivered four years of profits, amounting to £137m, before the £20m loss in 2019. This was obviously boosted by the amazing £92m surplus in 2017, which is actually the third highest profit in PL history.

#LCFC made hardly any money from player sales up to 2016, but profits have grown to an average of £45m in the past 3 years. Next year ‘s accounts will benefit from Harry Maguire’s £80m sale to #MUFC.

#LCFC EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), a proxy for cash operating profit, as it strips out player sales and exceptional items dropped from £18m to £(6)m, the first time it’s been negative since promotion to the Premier League.

Following the decline to £(6)m, #LCFC are one of only two clubs in the Premier League to report negative EBITDA, only “beaten” by #EFC £(15)m. For some context, their Midlands rivals for a European spot, #WWFC, generated £50m.

Since promotion to the Premier League, #LCFC revenue has grown by an average of nearly 20% every year, adjusting for the extraordinary 2017 figure of £223m, which was inflated by £70m of money from the Champions League. Now £50m higher than 2016, when they were crowned champions.

#LCFC £178m revenue is the 10th highest revenue in England, though the gap to the Big Six is enormous, as Leicester generate less than half of 6th placed #AFC £395m, while they are £450m below #MUFC £627m.

#LCFC retained 22nd position in the Deloitte Money League, which ranks clubs globally by revenue. Interestingly, this is just above Champions League semi-finalists Ajax and also ahead of the likes of Benfica, Valencia, Eintracht Frankfurt, Zenit St Petersburg and Porto.

#LCFC Premier League TV money up £5m to £123m, due to more facility fees (broadcast live 3 more times) and higher overseas TV rights. They will see further growth in 2019/20, if they finish in top half, as increase in overseas rights increase will be split by league position.

#LCFC hope to qualify for Europe, which would have a significant impact on revenue. As an illustration, in 2018/19 the English Champions League representatives received £80-100m TV money, while #CFC and #AFC got £41m and £34m respectively for reaching Europa League final.

Of course, #LCFC will be well aware of how much can be earned from Europe, as their solitary, albeit very lucrative, season in the Champions League means #LCFC have the 7th highest earnings from Europe of English clubs in last 5 years with €82m (£70m).

Gate receipts rose by £1.8m (14%) from £12.9m to £14.7m, despite 3 fewer Carabao Cup home games, though attendances were slightly up. Mid-table in the Premier League, but miles behind the Big Six, who range from #MUFC £111m to #MCFC £55m. Reviewing possible stadium expansion.

#LCFC average attendance rose slightly (by 1%) from 31,636 to 31,851, which was the 10th highest in the top flight, though a fair way below 9th placed #EFC 39,043. Ticket prices have again been frozen in 2019/20 for the fifth straight year.

#LCFC commercial revenue shot up 65% (£14m) to £36m, which the club attributed to “continuing to develop the brand and international reach”. Up to 9th in the Premier League, only behind the Big Six, #EFC £41m and #WHUFC £36m. However, only around a third of 6th placed #AFC £111m.

#LCFC owners King Power pay £16m sponsorship (shirt and stadium naming rights), which has probably driven most of the 2019 growth. Media reports have shirt deal as £4m. New deals in 18/19: Adidas replaced Puma as kit supplier, while Bia Saigon were the new sleeve sponsor.

#LCFC wage bill rose by £31m (26%) from £119m to £150m, due to further investment in the playing squad, including contract extensions. Club said that wages included changes to the management team, but not clear whether this only related to Claude Puel’s departure.

Following the steep increase, #LCFC £150m wage bill is currently 8th highest in England, though likely to be overtaken by #THFC when they publish their 2018/19 accounts. Leicester are below #EFC £160m, but ahead of #WHUFC £136m.

#LCFC wages to turnover ratio increased from 75% to 84%, which means that this is the 2nd highest (worst) in the Premier League of clubs that have reported to date, only “beaten” by #EFC 85%. Much higher than 55% in 2015 and well above UEFA’s recommended 70% upper limit.

Remuneration for #LCFC highest paid director decreased by 16% from £308k to £259k, presumably for chief executive Susan Whelan. That seems pretty good value, compared to the likes of #MUFC Ed Woodward and #THFC Daniel Levy, who both receive more than £3m.

As a result of increased investment in the playing squad, #LCFC player amortisation, the annual charge to expense transfer fees over the length of a player’s contract, rose £16m (32%) to £64m. This expense has increased each year in the Premier League, up from just £3m in 2014.

Following the increase, #LCFC player amortisation of £64m is the 7th highest in England, actually above #THFC £58m, though this is likely to be higher when Spurs publish 2018/19 accounts. Still far below big-spending #CFC £168m, #MCFC £127m, #MUFC £126m and #LFC £112m.

#LCFC other expenses rose £13m (59%) from £23m to £36m. Not really explained, but may well be where the £9m payment to Celtic to secure the services of Brendan Rodgers and his staff was booked.

#LCFC other expenses also include a £3.5m payment to King Power for “management services provided” (club now owes £7m) and £1.1m expenditure following the chairman’s death (crisis management, security and travel arrangements).

#LCFC splashed out a club record £119m on player purchases (including Maddison, Pereira, Soyuncu, Benkovic, Ghezzal, Ward and Evans), which is the 4th highest in the Premier League in 2018/19 to date. Have spent over £300m in the last three seasons.

#LCFC have really ramped up player investment, spending £405m in the last 5 years, compared to just £47m in the preceding 5 years. Over the same periods, net spend tripled from £39m to £128m. The 2019/20 purchases include Tielemans, Perez and Praet.

The market value of the #LCFC playing squad has been assessed by the directors as £482m, which is around £300m more than the value in the accounts, implying significant unrealised profit. This value increased by £135m in 2019 (massively up from £65m in 2015).

#LCFC gross debt rose by £66m to £91m, including new £55m bank loan with Macquarie Bank and £36m from the owners (up £11m in 2019): £20m loans and £15m finance leases from stadium purchase. Debt was significantly cut in 2014 by converting £103m of shareholder loans into equity.

Since year-end, #LCFC took out a new 6-year £91m loan facility with the owners to fund construction of the new training ground and some stadium development. There is also a new Macquarie facility, but that probably replaces the previous one shown in the 2019 accounts.

#LCFC £91m debt is mid-table in the Premier League, though will further increase to fund their infrastructure projects. Many other clubs have also taken on debt for new stadiums or training grounds, e.g. #THFC £466m, #BHAFC £280m, #AFC £217m and #LFC £129m.

Also big growth in #LCFC transfer debt, up from £9m in 2015 to £97m, though partly offset by increase in transfer fees owed by other clubs to £53m (so net £43m). In addition, £39m contingent liabilities potentially payable, dependent on player appearances and team success.

#LCFC only paid £193k interest in 2018/19, as owner loans are interest-free. The finance leases have an 8% interest rate, but this appears to be only accrued and not paid. Should increase going forward with additional external debt for training ground and stadium.

Despite £60m of additional loans, #LCFC had a net £16m cash outflow in 2018/19. They lost £14m from operations, but spent a net £40m on players and £22m on infrastructure, mainly the new training ground at Seagrove, where another £42m has been spent since year-end.

Consequently, #LCFC cash balance fell £16m from £27m to £11m. This is one of the lowest in the Premier League, far below the likes of #MUFC £308m, #AFC £167m and #MCFC £130m. The owners invest pretty much all money available into the club (players and buildings).

Since King Power acquired #LCFC in August 2010, the owners have put in £190m (£106m share capital and £84m loans), while £107m has been generated from operations. Most went on player purchases and capex £226m (not split in accounts until recently) and repaying old loans £60m.

#LCFC CEO Susan Whelan: “We aspire to challenge the Big 6. We remain a club of fierce ambition: striving to progress every season; giving ourselves every opportunity to compete more consistently at the elite level of the game. We’re very confident that the best is yet to come.”