How does this work?

[Yellow Rages 0]

I know there is another thread regarding the financial report but I wanted to understand a couple of specific points that I feel could be lost on the other ''finger pointing'' version.

Is there anybody here who has some financial background, that could possibly elaborate? I refer specifically to the below comment:

"Failure to win promotion at the end of 2007 will reduce our income by a minimum of £7m following the loss of the Premier League parachute payments. While the Club remains in the Championship it will be necessary to balance the cash flow and generate surplus funds for future player acquisitions by selling assets.  "In addition it is essential, in order to remain competitive, for the group to develop a new strategy to continue to generate new income streams and reduce operational costs to mitigate the impact of forecasted trading losses."

 

Do you think that the sale of assets will include the sale of players, or are they simply refering to buildings ect.

 

In what form do you believe new revenue streams would take.

 

To what extent do you feel that operational costs should reduce. IE no company cars for the CE and Directors as an example. Or maybe sending the players up to Sunderland in the economy plane seats. Or do you think it will be more back room based such as reducing head count in the office.

 

Lastly and most importantly, will we be able to see specifically how the strategy changes and what the impact has been.

[Yellow Rages 0]

Is there anybody who can clarify?

[ZLF 335]

The only people who can really answer this is the board - and revealing their strategic plan is unlikely to happen; reading between the line the strategy will be to contain costs to income.  Where this leaves promotion chasing is anyones guess  -are we at the start of a new 5 year cycle to get us promoted? 

Assets - the only ones we have are players and building;  precious few of the players have a market value so that only leaves land.  Selling players may be the way but will also give a clear indication of the clubs ambitions.

Revenue streams - they seem to have a pretty wide range of revenue streams already, including affiliate schemes on credit cards, phones etc etc.   Not my area of expertise but I cant easily idnetify any new revenue streams - but I am sure they are out there. 

Most operational costs are pretty fixed - rates, maintenace etc.  The biggest variable are salary costs, way ahead of salary benefits or tavelling expenses.  So I can see headcount (mainly behind the scenes) being reduced and salaries being reviewed - eg Hux will not get as attractive a salary if we remain in teh champs next season - and in my view that has to be right - lower level, older player just passing his peak, lower wages. 

This doesnt help you much - but is just a 7am  jumble of thoughts!

[Sir Quinny 0]

Right time for my bank manager hat

The sale of assets is likely to mean players - there value is generally heavily depreciated in the balance sheet - so there is more there than we expect.  Other assets are of course land - however I have the horrible feeling that there is nt that much left to sell - unless heaven forbid the stadium goes to a sale and lease back situation.

It is not really possible to guess what new revenue stream woudl be - we already have the restaurants and are soon to have the cut of hotel revenue - maybe we will hire the players out for childrens parties - sorry tis one is very much watch this space to see what the board comes up with next.

What we tend to see when operational costs are cut is redundancies and paycuts at the lower level - directors often forget to take cuts them selves - so like you say i fully expect to see the lower level ofice staff cut - I also reckon the playing staff will be trimmed - with a loss of the journeymen and a heavy concentration on bringing the cheaper youth players through.

Sadly I doubt we will see much of the strategy - apart from hearing about the player sales, redundancies and wages cuts.  I expect the only way we will be able to monitor theese changes is by runnig a cash flow anyalsis on next yeears accounts - its very doubtful we will have access to the monthly  figures that the club gives to the bank.

[Spiros 0]

Being an honourary beancounter I''ve done my duty and gone through accounts, here are my comments:

If you''re interested in the real figures (i.e. the ones that have to follow the accounting rules and can therefore be compared to other clubs) ignore the majority of stuff up to page 15 - this is all subjective information and can be presented as the club wish within reason although the overall figures (i.e. total turnover) will agree to the accounts.

There are only 2 important pieces of information in these whole accounts to me from which we should be a little worried about the amount of funds available in the future for players: 

Page 9 : Last paragraph

''It is important to note that the financial position of the Football club remains stable, however it is imperative that the club has a successful season during 2007/2007 to protect our income streams going forward.  Failure to win promotion at the end of 2007 will reduce our income by a minimum of £7m following the loss of the Premier League parachute payments''

The paragraph then goes on to talk about your point r.e. selling assets. To me this sets the scene for player sales.  No one at the club will be naive enough to assume we will get promoted so we then look at which assets will be sold.  The majority of assets are in land and buidlings (note 13) - then look at note 9c and we read ''....as it is the intention to retain ownership of the revalued land and capital assets for us in the existing business for the foreseeable future''.  So what does that leave to sell?  Well, he''s about 5ft 5 tall, drives a hummer and bangs the goals in. I can''t see what else there is we can sell given the above commitment not to sell any more land or buildings.

The other item of worry is the player wage / turnover ratio.  Now I''m sure it''s a balancing act between not cutting salaries so much that the best players leave and cutting salaries to an acceptable level but look at the numbers:  Turnover dropped by 34% and yet player costs only dropped by 16%.  The drop in turnover is entirely contributable to the drop in League and FA funds.  Now the club knew this would happen so why not make salaries drop in comparison in the season after relegation rather than after 2 years after relegation?.

There are 2 major, ongoing sources of income and cost that will influence the financial position of this and all other football clubs (ignoring one offs such as player transfers / land sales etc) :

Income: Money from the league

Cost: Player salary

Surely these should be the main considerations for any board of directors?  If the income / cost ratio had been maintained last year our player costs would have been £2m lower.  Also, we have a player bill of £2m more than the promotion season, are we seeing £2m worth of better football out there? 

Well, that''s one view of all this.  No doubt other people will either chastise me or have other views but overall I would expect player sales. 

 

 

 

 

 

 

[Yellow Rages 0]

Thank you for all of your responses.

Whilst I don''t fully understand all of it, it has helped my understanding.

One further point relating to salary as our major expense, If we set out a budget at the start of the fiscal year to account for salary and we fail to sign players leading up to the start of the season but sell a few players during that time also as per this season, our overall squad is therefore smaller and our outgoings are under budget. Why then can we not move some of that saving into offering Huckerby a better deal as an example. Or is the fact that they will only offer him a lesser contract a sign that a few more players will be coming in to bolster the squad and eat up any surplus salary budget.

[canary cherub 1]

It could be that the size of the wage bill has something to do with the number of loan players last season.  Loans are not a cheap option, especially if they are Prem players, because we have to pay 80-90% of their Prem wages.  At the same time, we spent just over £750,000 on new signings last summer, despite receiving nearly £2.5 million through players sales. 

It is extremely shortsighted to pare down the transfer budget to a level where we are having to plug basic gaps in the squad with loanees.  The cost of loans for a club like ours is justifiable only if they either add quality to an adequate basic squad (as in the promotion season) or in real emergencies.  Added to which, the constant coming and going of loanees, who by definition do not have the same commitment to the club as a permanent signing, does not make for a cohesive squad.

For financial as well as footballing reasons we need to increase the size of the squad if we are to be serious promotion challengers.