Thread by @SwissRamble

Leeds United’s 2018/19 accounts cover “one of the most exciting years in over a decade” under renowned coach Marcelo Bielsa, though it ultimately ended in disappointment, as they finished 3rd in the Championship before losing to #DCFC in the play-offs. Some thoughts follow #LUFC

#LUFC loss widened from £4m to £21m, despite revenue rising £8m (20%) from £41m to £49m, as profit on player sales dropped £2m to £16m and expenses increased by a chunky £23m, as owner Andrea Radrizzani made significant investments to turn Leeds into promotion contenders.

The main reason for #LUFC £8.2m revenue growth was a £5.4m (25%) increase in commercial income from £21.8m to £27.2m (mainly merchandising and hospitality), though gate receipts also rose £1.4m (12%) to £12.6m, while broadcasting was up £1.5m (19%) to £9.1m.

However, #LUFC saw significant cost growth, as wages surged £14.8m (47%) from £31.4n to £46.2m, player amortisation/impairment increased £4.7m to £13.5m & other expenses were up £3.7m (19%) to £23.2m. On the other hand, net interest payable was almost halved from £1.7m to £0.9m.

In fairness, most Championship clubs lose money with only 6 being profitable. As Radrizzani said, “The club makes losses. In this league, it is impossible not to.” That said, #LUFC £21m loss was one of the highest, only beaten by #AVFC £69m, #NCFC £39m, Reading £30m & #NFFC £25m.

#LUFC loss would have been even higher without £16m profit on player sales, mainly Ronaldo Vieira, Samuel Saiz and (possibly) Jack Clarke. Although lower than prior year’s £18m, still 5th highest in the Championship, though less than half of Bristol City £38m and #Boro £33m.

#LUFC have only made money once in the last 7 years (and that was only £1m in 2016/17). Losses had been reducing since the £20m reported in 2013/14, but 2018/19 was back up to £21m following the investment in Bielsa, his coaching team and the squad.

#LUFC profits on player sales have been on the rise, amounting to £55m over last 5 years. As Radrizzani explained, “Unfortunately to sustain a club in this league we need to sell one or two players each year.” 2019/20 will include the sales of Jansson, Roofe and Peacock-Farrell.

#LUFC EBITDA (Earnings Before Interest, Depreciation and Amortisation), which strips out player sales and non-cash items to give underlying profitability, further declined from £(10)m to £(20)m. This is a sizeable decrease since the positive £3m in 2011.

To be fair, only four Championship clubs have managed to achieve positive EBITDA in 2018/19, so #LUFC £(20)m is not overly shocking, though it is in the bottom half of the table. However, it’s a fair bit better than #AVFC £(54)m and #SUFC £(31)m, impacted by promotion bonuses.

#LUFC revenue has doubled in the last 4 years from £24.4m to £48.9m. Though £5.8m was due to bringing catering back in-house, large growth in other revenue streams: other commercial up £5.3m, merchandising £4.8m, TV £4.8m & gate receipts £3.9m. Commercial is 56% of total income.

#LUFC £41m revenue is the 6th highest in the Championship, only behind five clubs benefiting from parachute payments: the three relegated from the Premier League the previous season (WBA £71m, Stoke City £71m and Swansea City £68m) plus #Boro £56m and #AVFC £54m.

Championship revenue is hugely influenced by Premier League parachute payments with WBA, Stoke and Swansea leading the way with £43m, followed by #Boro, #HCAFC and #SAFC £35m. Radrizzani complained, “These mean some have much bigger budgets and it’s very difficult to compete.”

If parachute payments were excluded, #LUFC would easily have the highest revenue in the Championship with their £49m ahead of #AVFC £43m, #NCFC £34m, WBA £33m and Stoke City £33m. In fact, Leeds’ £49m is the highest revenue ever for a club without parachutes.

#LUFC TV income rose £1.5m (19%) to £9.1m, partly due to reaching the play-offs, including £2.5m EFL distribution and £4.6m PL solidarity payment. Leeds benefited from their games often being shown live, but the sums involved are not that much: £100k home, £10k away.

This is in stark contrast to TV money in the Premier League where clubs received £97m to £152m. 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 £1.4m (12%) to £12.6m, as average attendance grew from 31,521 to 34,033 and there was one more home game (the play-off semi-final). Revenue stream is up £4.4m (54%) in 3 years, so is now 2nd highest in the Championship, only below #AVFC £12.7m.

#LUFC attendances have risen by around 11,500 since 2016 from 22,448 to 34,033, including over 23,000 season ticket holders. In fact, crowds have further increased this season, averaging over 40,000, i.e. higher than the last time Leeds were in the Premier League.

#LUFC 2018/19 attendance of 34,033 was not only the 2nd highest in the Championship, only below #AVFC 36,027, but it was also higher than 11 clubs in the Premier League. The club recently announced a season ticket price freeze for 2020/21, the ninth year in a row.

Where #LUFC have really shone is commercial income, which rose £5m (25%) to £27m, comprising merchandising £9.4m (up £2.8m), catering £5.8m (up £0.6m) & other revenue including hospitality £11.9m, up £2.0m. This is by far the highest in the Championship, well ahead of #AVFC £18m.

As chief executive Angus Kinnear noted, “the club has rediscovered its appeal to international commercial partners.” This is underlined by the fact that #LUFC £27m commercial revenue is higher than around half the clubs in the Premier League.

#LUFC commercial income should further rise, as shirt sponsor 32Red extended its deal by 2 years in 2019, while Unibet now sponsors training wear. There have been media reports that Adidas will replace Kappa as kit supplier next year in a lucrative new deal, but not confirmed.

#LUFC wage bill rose significantly by £15m (47%) from £31m to £46m, due to the arrival of Bielsa, his coaching staff & new players (including loanees). This means that wages have more than doubled in last 2 years, rising from £21m to £46m to turn Leeds into a competitive team.

Even after this growth, #LUFC £46m wage bill was only 6th highest in the Championship, way below #AVFC £83m (including promotion bonuses), but also behind Stoke City £56m, #NCFC £51m, Swansea City £48m and WBA £47m. That said, two years ago Leeds wage bill was only 17th highest.

It is worth noting that #LUFC £46m wage bill is actually the 3rd highest ever in the Championship for clubs not benefiting from parachute payments. The only two clubs ahead of them, #NCFC and #WWFC £51m, both included substantial promotion bonuses in their figures.

#LUFC wages to turnover ratio increased from 77% to 94%, though this was still in the bottom half of the Championship, as more than half of the clubs in this very competitive division have ratios over 100%, led by #SUFC 195% (adversely impacted by promotion bonus) & Reading 194%.

#LUFC directors’ remuneration rose from £212k to £303k, though still a lot less than the peak of £794k in 2013 during the Ken Bates/David Haigh era. Mid-table in the Championship, a lot less than the likes of Reading £1.4m, Birmingham City £932k, #NFFC £932k and Stoke City £858k.

#LUFC other expenses rose £4m (19%) to £23m, which was the second highest in the Championship. In June 2017 Radrizzani bought back Elland Road stadium, which is leased from another group company until 2032 with annual rent of £1.5m, though rent-free for initial 33 months.

#LUFC player amortisation, the annual charge to write-down transfer fees over a player’s contract, has risen steadily from £1m in 2010 to £12m, reflecting increased transfer spend. Also £4m of impairment (write-down of player values) in last 6 years, including £1.5m in 2019.

Following this growth, #LUFC £12m player amortisation was 7th highest in the Championship, though it was still less than half of (relatively) big-spending clubs like Stoke City £29m, Swansea City £28m, Middlesbrough £26m and Aston Villa £26m.

#LUFC made player purchases of £16m, including Patrick Bamford and Barry Douglas. In the last 2 years, their outlay is £44m, compared to £34m in the previous decade. This was the fourth highest in the Championship, but miles below Stoke City £67m and #AVFC £31m.

Radrizzani loosened the purse strings in his first 2 years at #LUFC, averaging £18m gross spend, considerably more than the £4m average over the previous 7 years. However, there were no signings for fees in 2019/20, though many loans, including Costa, White, Harrison & Nketiah.

#LUFC gross debt rose £14m from £22m to £36m, including £25.6m from Radrizzani, £8m other loans (presumably former owner GFH), £1.2m finance leases and £1.1m overdraft. This would have been higher without owners converting £20m of debt to capital in the last 5 years.

Despite the growth, #LUFC £36m debt is pretty low for the Championship, far below the likes of #BRFC £142m, Stoke City £141m, #Boro £105m, Birmingham City £97m and #ITFC £96m, though this is largely provided by owners, so the debt is of the “soft” variety.

Although debt is high in the Championship, most of it is provided by owners who charge little or no interest. However, #LUFC £908k was the 4th highest in the division, as they are charged 2% + LIBOR on £18m and 6% + base rate on £7m following deferral of two 2018 payments.

#LUFC transfer debt (for remaining stage payments on transfer fees) has increased to £14m, but the amount they are owed by other clubs is higher at £16m. Promotion to the Premier League would cost them £25m (£20m bonus payments and £5m additional transfer fees).

#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 £9m cash from operations in 2018/19, then spent £3m on players (net), £3m on infrastructure (training facility), repaid £6m third party loans and made a £1m interest payment. This was largely funded by £18m new loans from Radrizzani, leaving a £4m net outflow.

As a result, #LUFC cash balance fell from £2.9m to £478k, which is the fourth smallest in the Championship. In fairness, 15 clubs in this division had less than £2m cash in the bank, so this is not that unusual (albeit a little worrying in the current shutdown).

In the last decade #LUFC received £80m funding from owners (£32m share capital and £48m loans). This has mainly been spent on covering operating losses £37m, capital expenditure £24m, loan repayments, interest and dividends £20m. They broke-even in the transfer market.

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 2018/19, even before deducting allowable expenses for academy, community & infrastructure (£3m a year).

However, if they were to post a similar loss in 2019/20 to the £21m reported last season, they would be right on the limit in FFP terms. This helps explain why Radrizzani is unhappy about some clubs selling stadiums to their “sister companies” to get round FFP rules.

To date Radrizzani has been a good owner at #LUFC, buying back the ground and investing significantly more in the squad. However, he has spoken of selling a stake to other investors, including Qatari Sports Investment.

However, any plans to sell a stake have been put on hold, due to the coronavirus pandemic. #LUFC are particularly impacted by the football shutdown, as they make so much money from their home games. Players, coaches and managers have deferred wages to ensure other staff are paid.

#LUFC investment has given them a great chance to regain their status in the Premier League, despite competing against clubs benefiting from hefty parachute payments. Currently top of the division, 7 points ahead of 3rd place, they will surely hope that the season is concluded.