Mel Morris’s money and Financial Fair Play

[CornwallRam]

Reading through the Ross McCormack thread there is an obvious conundrum – how can we spend a substantial amount and stay within FFP?

 

For a start there is nothing concrete to say that we are prepared to bid over the c£3m that we could realistically cover without risking sanctions – and that would seem to rule out any bid for George Thorne. Yet we do seem to be interested in both players and we also need to add a right back and possibly a centre back (depending on Barker and O’Brien) to have a full squad for the start of the season. No disrespect to previous regimes, but Rush, Evans and McClaren are experienced professionals in the transfer market and will know that there is no way that McCormack would be a cheap acquisition. That, to me, suggests that we have a decent war chest available. Don’t forget that such a war chest would also need to provide wages for any incomers above the difference between the released players and any new signings. Wages are also a more immediate issue for FFP.

 

So, where’s the money coming from?

 

It could be that we are about to (or maybe already have) sold a player for a big fee. That would be the obvious route to generating transfer and wage budget and sticking to the rules. So we shouldn’t be surprised to see one or two of Bryson (only works if the £750k thing is wrong), Hughes, Hendrick or Martin depart. Yet all the talk from the club has been about keeping the squad together.

 

The next obvious route is investment from within the ownership group. Clearly we’ve got a new investor, but some of our other big hitters might just have been bitten by the success bug. From my position on the halfway line looking up to the directors after the Brighton game, several of them looked very wide-eyed looking down on the jubilant Derby faithful. Wembley can only have strengthened that feeling. Brett Wilson also went on record as being quite shocked by the financial rewards of promotion. Maybe they have all decided to actually ignore FFP and give it a real go.

 

Assuming that FFP doesn’t just get cast aside (which I still believe it will) we don’t have to worry about sanctions for eighteen months. If get promoted then a fine of a few million will seem pretty insignificant. If we don’t we could still just sell our big earners and show that we are now back in line and avoid any embargo. OK there’s the risk that we might we stuck with them and have a January where we can’t buy anyone – but we’ve about eight of those in the past decade anyway!

 

Now, back to the main theme of the thread – Mel Morris. Why is he here? He’s a rich DCFC fan. Presumably he wants the same things we all do – promotion, consolidation, European football, the Premier League title and eventual domination of world football by Derby County. OK, even Mel’s half billion might struggle to achieve the whole list, but I can’t see why he’s invested if not to achieve the first two.

 

Yet under the FFP rules it’s a bit pointless. The owners can only put in up to £8m per season – which the other investors can easily manage between them. It is prudent to arrange the finances for the ‘worst case’ so actual losses will always be lower. Why would Morris get involved if all it meant was that he reduced the losses of the other investors? He might fund the extra £1.5m for upgrading the academy. He might even fund capital improvements to the ground. However, neither of those things will get us promoted in the short term and it’s not like our other owners are impoverished anyway. I could see how a rich Rams fan might want to take a majority share – the feeling of owning Derby County Football Club, but not just to be another impotent (due to FFP) board member. So my assumption is that Mel’s arrival signals an increase in investment.

 

Yet how does that tie in with FFP?

 

John Vicars mentioned that FFP is flawed. Sam Rush says that it gives a ridiculously large advantage to the parachute clubs and the current rules (allowed losses decreasing as parachute payments increase) mean that imbalance will get significantly worse. The Premier League also used their influence to get any fines imposed paid to charity rather that the un-promoted clubs. This was done because the PL think that the original idea would penalise owners who had invested and reward owners who had not. If the idea of FFP is to stop clubs running up debts then why does it limit equity investment? That is the flaw in the system. I know that league members are discussing amending the rules.

 

This would seem to make sense as a new proposal –

 

Please excuse the ‘back of a fag packet’ figures, but the actual rules could easily substitute my assumptions with the proper figures. I also haven’t taken into account the changes due. It seems that we, as a big club for this league, are able to run a player wage bill of around £11m and stay within the rules - £8m loss. Most relegated clubs are similar in size to us, so their running costs aside from wages will be similar. That means that a newly relegated team should be able to run a wage bill of £11m (generated from normal activities and £8m from investors/loans of up to £3m) plus £23m form the parachute. So a wage bill of £33m to stay within the rules. OK it might be that some of that is used to fund amortisation on fees paid – but we manage about £1.5m in fees per year so maybe we can assume a players budget of £34.5m to cover wages and transfers.

 

So why not even the playing field? Increase the equity allowed to be injected by £23m for none-parachute teams (and include them on a scale to make the balance up as those payments fall in subsequent years). So clubs can lose up to £31m, but only £3m can be funded by debt. The remainder has to come from equity. That allows owners to invest in their clubs without driving up debt, whilst nullifying the ridiculous advantage of the parachute payments. Now if our board knew that they could inject and extra £23m getting a rich local businessman on board makes far more sense.

 

Does Mel Morris herald a big change in FFP?

 

Sorry for going on – but it’s Saturday and I want to go to a match and can’t afford to go to Brazil!

[Curtains]

Reading through the Ross McCormack thread there is an obvious conundrum – how can we spend a substantial amount and stay within FFP?

For a start there is nothing concrete to say that we are prepared to bid over the c£3m that we could realistically cover without risking sanctions – and that would seem to rule out any bid for George Thorne. Yet we do seem to be interested in both players and we also need to add a right back and possibly a centre back (depending on Barker and O’Brien) to have a full squad for the start of the season. No disrespect to previous regimes, but Rush, Evans and McClaren are experienced professionals in the transfer market and will know that there is no way that McCormack would be a cheap acquisition. That, to me, suggests that we have a decent war chest available. Don’t forget that such a war chest would also need to provide wages for any incomers above the difference between the released players and any new signings. Wages are also a more immediate issue for FFP.

So, where’s the money coming from?

It could be that we are about to (or maybe already have) sold a player for a big fee. That would be the obvious route to generating transfer and wage budget and sticking to the rules. So we shouldn’t be surprised to see one or two of Bryson (only works if the £750k thing is wrong), Hughes, Hendrick or Martin depart. Yet all the talk from the club has been about keeping the squad together.

The next obvious route is investment from within the ownership group. Clearly we’ve got a new investor, but some of our other big hitters might just have been bitten by the success bug. From my position on the halfway line looking up to the directors after the Brighton game, several of them looked very wide-eyed looking down on the jubilant Derby faithful. Wembley can only have strengthened that feeling. Brett Wilson also went on record as being quite shocked by the financial rewards of promotion. Maybe they have all decided to actually ignore FFP and give it a real go.

Assuming that FFP doesn’t just get cast aside (which I still believe it will) we don’t have to worry about sanctions for eighteen months. If get promoted then a fine of a few million will seem pretty insignificant. If we don’t we could still just sell our big earners and show that we are now back in line and avoid any embargo. OK there’s the risk that we might we stuck with them and have a January where we can’t buy anyone – but we’ve about eight of those in the past decade anyway!

Now, back to the main theme of the thread – Mel Morris. Why is he here? He’s a rich DCFC fan. Presumably he wants the same things we all do – promotion, consolidation, European football, the Premier League title and eventual domination of world football by Derby County. OK, even Mel’s half billion might struggle to achieve the whole list, but I can’t see why he’s invested if not to achieve the first two.

Yet under the FFP rules it’s a bit pointless. The owners can only put in up to £8m per season – which the other investors can easily manage between them. It is prudent to arrange the finances for the ‘worst case’ so actual losses will always be lower. Why would Morris get involved if all it meant was that he reduced the losses of the other investors? He might fund the extra £1.5m for upgrading the academy. He might even fund capital improvements to the ground. However, neither of those things will get us promoted in the short term and it’s not like our other owners are impoverished anyway. I could see how a rich Rams fan might want to take a majority share – the feeling of owning Derby County Football Club, but not just to be another impotent (due to FFP) board member. So my assumption is that Mel’s arrival signals an increase in investment.

Yet how does that tie in with FFP?

John Vicars mentioned that FFP is flawed. Sam Rush says that it gives a ridiculously large advantage to the parachute clubs and the current rules (allowed losses decreasing as parachute payments increase) mean that imbalance will get significantly worse. The Premier League also used their influence to get any fines imposed paid to charity rather that the un-promoted clubs. This was done because the PL think that the original idea would penalise owners who had invested and reward owners who had not. If the idea of FFP is to stop clubs running up debts then why does it limit equity investment? That is the flaw in the system. I know that league members are discussing amending the rules.

This would seem to make sense as a new proposal –

Please excuse the ‘back of a fag packet’ figures, but the actual rules could easily substitute my assumptions with the proper figures. I also haven’t taken into account the changes due. It seems that we, as a big club for this league, are able to run a player wage bill of around £11m and stay within the rules - £8m loss. Most relegated clubs are similar in size to us, so their running costs aside from wages will be similar. That means that a newly relegated team should be able to run a wage bill of £11m (generated from normal activities and £8m from investors/loans of up to £3m) plus £23m form the parachute. So a wage bill of £33m to stay within the rules. OK it might be that some of that is used to fund amortisation on fees paid – but we manage about £1.5m in fees per year so maybe we can assume a players budget of £34.5m to cover wages and transfers.

So why not even the playing field? Increase the equity allowed to be injected by £23m for none-parachute teams (and include them on a scale to make the balance up as those payments fall in subsequent years). So clubs can lose up to £31m, but only £3m can be funded by debt. The remainder has to come from equity. That allows owners to invest in their clubs without driving up debt, whilst nullifying the ridiculous advantage of the parachute payments. Now if our board knew that they could inject and extra £23m getting a rich local businessman on board makes far more sense.

Does Mel Morris herald a big change in FFP?

Sorry for going on – but it’s Saturday and I want to go to a match and can’t afford to go to Brazil!

Cornwall I believe FFP is a complete load of baloney and QPR completely ignored it and I doubt they will be punished !

I hope Mel and Brett have talked big player investment in Chicago.

Mel Morris and Brett will back Mac I hope .

I'm watching this space.

[Philmycock]

Good read Cornwall. Ramblur will be seething that you've nicked his yellow jersey.

[King Kevin]

Good post ,you must be bored.It was always going to be an interesting summer .Good /great season our players on others radar,trying to keep our squad together etc etc.

 

Exciting times ahead ,I hope we come out on top this is where we find out just how good DCFC's management is.

[Grantona]

FFP is here to stay in one form or another - if clubs are allowed to spend what they want on players, wages will go even higher and spiral even more out of control.

 

The best way forward is to bring in a salary cap like they do in cricket, rugby union and rugby league - also nearly every major American sport has a salary cap and it works well over there.

 

Serie B in Italy has imposed (or is proposing to bring in) a salary cap.

[ramblur]

Reading through the Ross McCormack thread there is an obvious conundrum – how can we spend a substantial amount and stay within FFP?

 

For a start there is nothing concrete to say that we are prepared to bid over the c£3m that we could realistically cover without risking sanctions – and that would seem to rule out any bid for George Thorne. Yet we do seem to be interested in both players and we also need to add a right back and possibly a centre back (depending on Barker and O’Brien) to have a full squad for the start of the season. No disrespect to previous regimes, but Rush, Evans and McClaren are experienced professionals in the transfer market and will know that there is no way that McCormack would be a cheap acquisition. That, to me, suggests that we have a decent war chest available. Don’t forget that such a war chest would also need to provide wages for any incomers above the difference between the released players and any new signings. Wages are also a more immediate issue for FFP.

 

So, where’s the money coming from?

 

It could be that we are about to (or maybe already have) sold a player for a big fee. That would be the obvious route to generating transfer and wage budget and sticking to the rules. So we shouldn’t be surprised to see one or two of Bryson (only works if the £750k thing is wrong), Hughes, Hendrick or Martin depart. Yet all the talk from the club has been about keeping the squad together.

 

The next obvious route is investment from within the ownership group. Clearly we’ve got a new investor, but some of our other big hitters might just have been bitten by the success bug. From my position on the halfway line looking up to the directors after the Brighton game, several of them looked very wide-eyed looking down on the jubilant Derby faithful. Wembley can only have strengthened that feeling. Brett Wilson also went on record as being quite shocked by the financial rewards of promotion. Maybe they have all decided to actually ignore FFP and give it a real go.

 

Assuming that FFP doesn’t just get cast aside (which I still believe it will) we don’t have to worry about sanctions for eighteen months. If get promoted then a fine of a few million will seem pretty insignificant. If we don’t we could still just sell our big earners and show that we are now back in line and avoid any embargo. OK there’s the risk that we might we stuck with them and have a January where we can’t buy anyone – but we’ve about eight of those in the past decade anyway!

 

Now, back to the main theme of the thread – Mel Morris. Why is he here? He’s a rich DCFC fan. Presumably he wants the same things we all do – promotion, consolidation, European football, the Premier League title and eventual domination of world football by Derby County. OK, even Mel’s half billion might struggle to achieve the whole list, but I can’t see why he’s invested if not to achieve the first two.

 

Yet under the FFP rules it’s a bit pointless. The owners can only put in up to £8m per season – which the other investors can easily manage between them. It is prudent to arrange the finances for the ‘worst case’ so actual losses will always be lower. Why would Morris get involved if all it meant was that he reduced the losses of the other investors? He might fund the extra £1.5m for upgrading the academy. He might even fund capital improvements to the ground. However, neither of those things will get us promoted in the short term and it’s not like our other owners are impoverished anyway. I could see how a rich Rams fan might want to take a majority share – the feeling of owning Derby County Football Club, but not just to be another impotent (due to FFP) board member. So my assumption is that Mel’s arrival signals an increase in investment.

 

Yet how does that tie in with FFP?

 

John Vicars mentioned that FFP is flawed. Sam Rush says that it gives a ridiculously large advantage to the parachute clubs and the current rules (allowed losses decreasing as parachute payments increase) mean that imbalance will get significantly worse. The Premier League also used their influence to get any fines imposed paid to charity rather that the un-promoted clubs. This was done because the PL think that the original idea would penalise owners who had invested and reward owners who had not. If the idea of FFP is to stop clubs running up debts then why does it limit equity investment? That is the flaw in the system. I know that league members are discussing amending the rules.

 

This would seem to make sense as a new proposal –

 

Please excuse the ‘back of a fag packet’ figures, but the actual rules could easily substitute my assumptions with the proper figures. I also haven’t taken into account the changes due. It seems that we, as a big club for this league, are able to run a player wage bill of around £11m and stay within the rules - £8m loss. Most relegated clubs are similar in size to us, so their running costs aside from wages will be similar. That means that a newly relegated team should be able to run a wage bill of £11m (generated from normal activities and £8m from investors/loans of up to £3m) plus £23m form the parachute. So a wage bill of £33m to stay within the rules. OK it might be that some of that is used to fund amortisation on fees paid – but we manage about £1.5m in fees per year so maybe we can assume a players budget of £34.5m to cover wages and transfers.

 

So why not even the playing field? Increase the equity allowed to be injected by £23m for none-parachute teams (and include them on a scale to make the balance up as those payments fall in subsequent years). So clubs can lose up to £31m, but only £3m can be funded by debt. The remainder has to come from equity. That allows owners to invest in their clubs without driving up debt, whilst nullifying the ridiculous advantage of the parachute payments. Now if our board knew that they could inject and extra £23m getting a rich local businessman on board makes far more sense.

 

Does Mel Morris herald a big change in FFP?

 

Sorry for going on – but it’s Saturday and I want to go to a match and can’t afford to go to Brazil!

Interesting post,CornwallRam-always good to know what folks are thinking.On FFP,I was sure this was supposed to be on the agenda for Championship clubs at the recent AGM,yet there's been zilch news since.I'd be fairly confident in predicting that allowances are going to increase,but that there's no agreement yet on the amounts.If we were  suddenly to go on a spending spree ,that would signal to me that the owners were confident that the £5m maximum allowances for 2015/16 is a dead duck.Even if allowances rose by an extra £3m,that would allow you to,say,buy £6m of players on 3 year contracts and increase the wage bill by £1m per year on top of what a £5m limit would have allowed.

 

I noted with interest your suggestion that selling players might allow significant reinvestment ,whilst still complying with FFP.It seems that I've got further work to do on this subject.If we were to sign players on 3 year contracts,then this action would impact FFP fairly evenly over 3 consecutive years.Now we move onto the sales-any book profits made (and in the kind of cases you suggest,this would represent nearly all of fees received) would only impact (in full) FFP in the year sold,with no assistance in years 2 and 3.The only benefits from sale in years 2 and 3 would be savings on amortisation (peanuts) + savings on wages.Thus we would romp through FFP in year 1 and struggle thereafter.This is precisely why I earlier suggested that FFP should work on a rolling,3 year accumulated total basis.

 

I think you may be confused over the equity issue.FFP only indirectly restricts the equity you may introduce,but compels you to inject equity to cover certain losses.Hence if you could inject £20m of equity and somehow find a way of spending this on players whilst still complying with FFP (a tall order),then FFP wouldn't forbid such action.

 

You could well be right in suggesting that FFP limits might rise significantly, if matched in the main by equity injections,the aim being to prevent accumulating debt.However,in this situation I don't really see a point in imposing limits at all.As another poster has pointed out,this would do nothing to stop spiraling wages,however his examples of other sports don't include the thorny issue of massive parachute payments.Leagues 2 and 3 work on the basis of salary cap,yet we followed another route-why?Presumably the clubs wouldn't have it.

[Philmycock]

My head hurts, the heavyweights do battle, good reading though

[ramblur]

My head hurts, the heavyweights do battle, good reading though

It's no wonder your head hurts if you think this is some kind of competition or "battle".

[Philmycock]

It's no wonder your head hurts if you think this is some kind of competition or "battle".

Sorry sir...

C'mon Cornwall!!!!!

[Uptherams]

We got £3m for the play off final. Another £2m for Chelsea and Brighton. £0.7m stadium naming rights per season. A new shirt sponsor, details not released but I would imagine that it is higher than previously. Season ticket sales are up and our gates will likely be 3000-4,000 higher than last season. Do we have money to spend, I would think so. 

 

Please correct me on any figures. But the conclusion will still be the same. We have money to spend (so to speak).

[ramblur]

We got £3m for the play off final. Another £2m for Chelsea and Brighton. £0.7m stadium naming rights per season. A new shirt sponsor, details not released but I would imagine that it is higher than previously. Season ticket sales are up and our gates will likely be 3000-4,000 higher than last season. Do we have money to spend, I would think so. 

 

Please correct me on any figures. But the conclusion will still be the same. We have money to spend (so to speak).

The issue isn't funding though,it's complying with FFP. Think you're a bit optimistic on the £2m for Clelsea/Brighton.

[Uptherams]

The issue isn't funding though,it's complying with FFP. Think you're a bit optimistic on the £2m for Clelsea/Brighton.

 

Your right and we can have losses up to (£8m). I don't think I was optimistic in £2m for two full capacity televised matches. I think that figure of roughly £1m per game is about right. 

[ramblur]

Your right and we can have losses up to (£8m). I don't think I was optimistic in £2m for two full capacity televised matches. I think that figure of roughly £1m per game is about right. 

How much do you think the tv fee was for each game?

[Uptherams]

How much do you think the tv fee was for each game?

About £150,000. FA Cup TV fee is £144,000. 

[ramblur]

About £150,000. FA Cup TV fee is £144,000. 

So,taking the FA cup game,you're suggesting that our share of gate receipts came to £850,000? As we would have received less than 50% of gate receipts,we would have had to bring in close to £2m-divide that by 33,000 and see what kind of average ticket price you come up with.

 

The Brighton situation is even worse,for reasons that have been outlined many times in the past. Sam Rush is said to have stated in the past that we'd have made very little out of being beaten semi finalists.

[StaffsRam]

Only thing I'll say on FFP is that I agree with the principle that it's trying to have everyone abide to, but it's fooking incredibly irritating when so many other clubs play to different rules and profit from it.

 

I really do hate the many and various ways that the PL comes up with to protect now not only clubs who're in the PL but those that come down. Parachute payments are a farce - the argument is that it helps clubs with massively wagebills dropping out of the PL - how's about another solution for those clubs - sell some players, especially those on stupidly huge contracts. Instead, no, you can have a parachute payment so that you can keep those players and have a massive advantage over the other clubs in the division. It's no small wonder that so many clubs come down and end up going straight back up, or nearly do.

 

If we weren't so desperate to get into it, the PL could curl up and die as far as I was concerned.

[Uptherams]

So,taking the FA cup game,you're suggesting that our share of gate receipts came to £850,000? As we would have received less than 50% of gate receipts,we would have had to bring in close to £2m-divide that by 33,000 and see what kind of average ticket price you come up with.

 

The Brighton situation is even worse,for reasons that have been outlined many times in the past. Sam Rush is said to have stated in the past that we'd have made very little out of being beaten semi finalists.

£150,000 for 3 matches. For a total of £450,000 which means roughly £1.5 gate receipts for three sell out matches. In which we roughly get 50%. Total gate about 92,000. Divided by two equals 46,000. £1.5m /46,000 = £32. average ticket price. 

 

Adult season ticket prices for Chelsea were £20 while non season tickets were £25 and for Brighton it was £25 and £32. So the average was probably somewhere around £25. So without considering any other revenue the total figure comes to approximately £1.6m. So my figure of £2m off the top of my head was quite good. But that all depends on people's translation of optimistic. Regardless it all adds up. 

[davenportram]

£150,000 for 3 matches. For a total of £450,000 which means roughly £1.5 gate receipts for three sell out matches. In which we roughly get 50%. Total gate about 92,000. Divided by two equals 46,000. £1.5m /46,000 = £32. average ticket price.

Adult season ticket prices for Chelsea were £20 while non season tickets were £25 and for Brighton it was £25 and £32. So the average was probably somewhere around £25. So without considering any other revenue the total figure comes to approximately £1.6m. So my figure of £2m off the top of my head was quite good. But that all depends on people's translation of optimistic. Regardless it all adds up.

VAT and other expenses to take out too.

[CornwallRam]

Sorry sir...

C'mon Cornwall!!!!!

It would take a very brave or foolish person to 'battle' Ramblur over finances...and I try not be either

 

Now if he wants a rumble over eighteenth century military organisation, logistics and the political control of the British Army I might be a little bolder...although much 'fiscal military state' stuff tends towards economics so I might not.

[CornwallRam]

 

 

I think you may be confused over the equity issue.FFP only indirectly restricts the equity you may introduce,but compels you to inject equity to cover certain losses.Hence if you could inject £20m of equity and somehow find a way of spending this on players whilst still complying with FFP (a tall order),then FFP wouldn't forbid such action.

 

Hi Ramblur - I take your point about funding through sales. I did know that already, but somehow didn't allow the logic of it to find its way into my post.

 

The bit I don't quite get about your answer is the bit above,

 

My understanding is that the FFP figures are based on the individual year's trading - so cash in the bank doesn't mitigate the loss. That also stops this season;s extra income from being counted in the FFP calculation, The current allowable loss is £8m - with up to £3m of this allowed to be funded by debt, so the remainder needs to be funded by equity, Presumably there is no compulsion to take on the debt, so the rules seem to allow for £8m of equity to be introduced.

 

Now I do get that the owners could just randomly put £50m into the club's bank account - but that wouldn't be used in the FFP calculation (above the £8m allowed)?

 

So from my understanding (which at this point I'm betting is incorrect) there is an FFP cap of £8m i=on inward investment. So, where have I missed the point?

 

I wonder if it now also makes sense to pay off the loan on the stadium? OK, the interest rate is low, but would getting rid of the payment not reduce the outgoings and thus,allow an equivalent amount to be added to the wage bill? Or does it just count as spending on infrastructure and fall outside FFP?