FFP going into next season

[ramblur]

Just had a quick look at Wolves' 16/17 accounts , where a loss of £20.83m was announced. They'd do well to achieve an FFP position below £13m, but before anyone gets excited, my impression is that 3 year cycle included 14/15, where the allowable loss was less than £13m. Thus they might have posted an FFP loss over the £13m , but stayed within the £39m overall. However, if they had in fact done this, that 16/17 result becomes part of 2 more 3 year cycles, which would mean that they would have to report FFP losses less than the £26m (in total) in the other 2 years.

Now on to the main reason I looked at the accounts. Again there is no mention of residual values, and their report discloses that amortisation  charges for the year rose to £7.613m due to certain signings. This seems to rather underline the lack of RVs.

I'm almost scared of looking at other clubs' accounts . ,in case we're the only club allocating these RVs. However,there's nothing illegal ( from the point of view of financial regs), as the club is only obliged to put in what it considers to be fair value for intangibles, and might impair where thought necessary.

I'm not a great fan of the new method, because I think the old method was 'safer', and probably much easier to plan ahead.

[ramblur]

Had a look at Villa (and wish I hadn't) -my last look for a while.

The club showed a loss for the year of c£7.5m for the year, and there's no mention of intangibles in the B/S ,and no mention of amortisation. Groan, because I knew they must be held within another company in the group. Sure enough, I found them in the consolidated accounts of Recon Group UK Ltd , and the amortisation  charge for the year was £23.737m. Don't worry,they don't 'get away' with anything as I'm sure that they would have to submit any relevant accounts to the EFL. The consolidated loss  shown in the accounts was £14.546m, but don't ask me how this was derived,because I've already got a big enough headache.

Again, the notes in the consolidated accounts re intangibles makes no mention of RVs.

Be careful when looking at other clubs' accounts, as you might draw false conclusions in certain cases.

[Carnero]

@ramblur aren't the player registrations classed as tangible assets rather than intangibles??

[ramblur]

1 minute ago, Carnero said:

@ramblur aren't the player registrations classed as tangible assets rather than intangibles??

No, although the players themselves are tangible enough (cue some jokes) , clubs don't own the players, merely their registrations. If anyone wondered what the difference between depreciation and amortisation is, depreciation relates to tangible assets where the 'life' is unknown and has to be estimated. The asset life is known in the case of intangibles, and amortisation is applied . I know you might say that contracts might be extended, but it's the original situation that counts,where the contract life is known.

The other difference between the 2 is that I can input 'depreciation' with no problem, but amortisation seems to be auto corrected to 'amortization'  Thus if you see me use the 'z', I can't be bothered to 'do battle'.

[RamNut]

8 hours ago, The Key Club King said:

When we talk about being within FFP limits we seem to be ignoring the fact that this limit is a £39 million loss over 3 years and this is being covered by somebody who is getting a lot of stick because the team isn't winning. The vast majority of clubs are either bankrolled by a group or individual, or accumulate debt - sometimes both. We need somebody to put their hand in their pocket to cover this and help us compete and these people don't grow on trees. Those who want him out should think about who would replace him. Anonymous Asian/Middle-Eastern/American "investors" is not specific enough either. 

I think most people see the benefits in local ownership, they just note a catalogue of bad decisions. 

Mel seems to have realised that the 15-16  £15m spend was a mistake.

 

[Gritty]

On 17/03/2018 at 17:13, ramblur said:

There's a difference between 'bemoaning' and simply stating a fact that we have to operate within FFP. Why haven't you mentioned the other thing that came up,viz that other clubs were trying to get the rules changed, whilst we want them to stay the way they are,and intend to stay within the limits?

This RV thing confuses me. 

So we bought Butterfield for 6mn. Let's assume we (over)valued him at end of last season as still worth 6mn. Then we try and offload this summer and can only get 500k for him.  In ffp terms he costs us 5.5mn this summer?

[Sparkle]

9 minutes ago, feisty said:

This RV thing confuses me. 

So we bought Butterfield for 6mn. Let's assume we (over)valued him at end of last season as still worth 6mn. Then we try and offload this summer and can only get 500k for him.  In ffp terms he costs us 5.5mn this summer?

Who would give us £500,000 for him?

[ramblur]

1 hour ago, feisty said:

This RV thing confuses me. 

So we bought Butterfield for 6mn. Let's assume we (over)valued him at end of last season as still worth 6mn. Then we try and offload this summer and can only get 500k for him.  In ffp terms he costs us 5.5mn this summer?

In those circumstances ,yes, but the note in the accounts clearly states that these values are examined every year, and may be downgraded if thought appropriate, which would lead to an impairment charge (if you like, amortization that would have been charged from the outset if the lower valuation had been used), thus spreading the load over more than one season. Having viewed Stephen Pearce's performances on fans' forums,  I can see that he's a very capable guy who wouldn't let this kind of situation arise.

Whenever either Mel or Stephen say that we intend to stay within the limits, I trust to their integrity implicitly.

One other thing occurs to me. Next year will be the 3rd of a cycle including 16/17 and the current year. I'd be pretty confident that the combined results of the latter 2 will be a fair bit less than a combined £26m, which means that we probably have the safety valve of being able to exceed £13m next year if we had to. I don't expect it , however , because as I've said before this high figure would then impact 2 further 3 year cycles. Let's just say that we hit £16m, which would only leave £23m total for the other 2 years (an average of £11.5m a year). At first glance it might seem that an onerous cull would have to take place (£4.5m) to stay within limits, but in your example the situation that might arise in your  wouldn't materialise in the following years ( not the same one anyway), so you'd have to cut back an amount less than the £4.5m, to the extent that the 'rogue' featured next year (hypothetically).

However, as I've already said I'd be surprised, bordering on amazed, if this situation arose. Whenever I talk about FFP I'm trying to work out what kind of leeway we may have to stay within the limits, as opposed to suggesting that we might go over it. Why should I when we haven't in all the previous years?

[ramblur]

3 hours ago, RamNut said:

I think most people see the benefits in local ownership, they just note a catalogue of bad decisions. 

Mel seems to have realised that the 15-16  £15m spend was a mistake.

 

I'm sure he would have , because we spent an all in total of c£30m on players' regs, allied to a large hike in wages . I'm sure he wished he'd only put in £15m!

The catalogue of bad decisions, as you put it, arose mainly because he backed a head coach to the hilt. If you think he should have interfered in the transfers, then I'm sure there would have been an enraged outcry on here.

I remember him saying that he personally had misgivings about the CM loan in 16/17, but allowed his manager to manage.

I didn't see many catalogues being brandished by fans in 15/16.

Whilst I don't like to speak favourably of the gumps, I was a bit disgusted that the late Nigel Doughty ended up being almost reviled by a section of their fans. From afar I got the impression that here was a genuine, integrous guy who loved the club he supported and did everything in his power to try and improve its status. It didn't work out,but that's football for you. He put a hell of a lot of money in , and I know that he didn't expect to get the majority of his money back because of a string of impairments in one of the group accounts ( impairments can be reversed, especially if promotion were achieved)...........and,of course,the family didn't get it back.

I think Mel has already put in more than Nigel, but here we go again,by the looks of it.

[Gritty]

6 hours ago, ramblur said:

In those circumstances ,yes, but the note in the accounts clearly states that these values are examined every year, and may be downgraded if thought appropriate, which would lead to an impairment charge (if you like, amortization that would have been charged from the outset if the lower valuation had been used), thus spreading the load over more than one season. Having viewed Stephen Pearce's performances on fans' forums,  I can see that he's a very capable guy who wouldn't let this kind of situation arise.

Whenever either Mel or Stephen say that we intend to stay within the limits, I trust to their integrity implicitly.

One other thing occurs to me. Next year will be the 3rd of a cycle including 16/17 and the current year. I'd be pretty confident that the combined results of the latter 2 will be a fair bit less than a combined £26m, which means that we probably have the safety valve of being able to exceed £13m next year if we had to. I don't expect it , however , because as I've said before this high figure would then impact 2 further 3 year cycles. Let's just say that we hit £16m, which would only leave £23m total for the other 2 years (an average of £11.5m a year). At first glance it might seem that an onerous cull would have to take place (£4.5m) to stay within limits, but in your example the situation that might arise in your  wouldn't materialise in the following years ( not the same one anyway), so you'd have to cut back an amount less than the £4.5m, to the extent that the 'rogue' featured next year (hypothetically).

However, as I've already said I'd be surprised, bordering on amazed, if this situation arose. Whenever I talk about FFP I'm trying to work out what kind of leeway we may have to stay within the limits, as opposed to suggesting that we might go over it. Why should I when we haven't in all the previous years?

What about players entering last year of contract where we are planning on offering an extension but they then decline? Ie. We then go from valuing at Xmn to zero? That sounds risky 

Can RV ever increase above purchase price? Ie. Hughes was home grown but would he be valued at zero prior to sale leading to profit of 5mn? Or 15mn prior to sale leading to loss of 10mn?

Interesting to me all this!

 

 

[The Key Club King]

6 hours ago, ramblur said:

Whilst I don't like to speak favourably of the gumps, I was a bit disgusted that the late Nigel Doughty ended up being almost reviled by a section of their fans. From afar I got the impression that here was a genuine, integrous guy who loved the club he supported and did everything in his power to try and improve its status. It didn't work out,but that's football for you. He put a hell of a lot of money in , and I know that he didn't expect to get the majority of his money back because of a string of impairments in one of the group accounts ( impairments can be reversed, especially if promotion were achieved)...........and,of course,the family didn't get it back.

I think Mel has already put in more than Nigel, but here we go again,by the looks of it.

This concerns me too. If we miss the play-offs after falling from second place then there will be a lot of discontent and I fear many people will turn against the owner like they did with Lionel Pickering.

[ramblur]

6 minutes ago, feisty said:

What about players entering last year of contract where we are planning on offering an extension but they then decline? Ie. We then go from valuing at Xmn to zero? That sounds risky 

Can RV ever increase above purchase price? Ie. Hughes was home grown but would he be valued at zero prior to sale leading to profit of 5mn? Or 15mn prior to sale leading to loss of 10mn?

Interesting to me all this!

 

 

Back to the serious stuff then, after my fun (for me) in another thread.

Yep, to me your first point is the main worry I have. If an expensive player was secretly intending to see out his contract , and maybe get a juicy signing fee elsewhere, we might not get an inkling till it's too late. Happily though,this doesn't seem to happen all that often in football.

Your second point has come up before. Whilst you can revalue tangible assets upwards (as we did with PP ) , and thus create a gain (not to P/L though), I'd be very surprised if you can do the same for intangibles . However, as I've said before,I'm not up to speed on current financial regs (and don't intend to be - worse than reading 'War and Peace' backwards ).

I reckon you're probably almost right on Hughes, except for the fact that agents' fees relating to contracts (including extensions) are capitalized (i.e. form part of the value shown in intangibles, in this case). Thus his 'carrying value' probably equated to the sum of such fees.

Damn it - I've just noticed another of those blasted autocorrect? zs 

[ramblur]

16 minutes ago, The Key Club King said:

This concerns me too. If we miss the play-offs after falling from second place then there will be a lot of discontent and I fear many people will turn against the owner like they did with Lionel Pickering.

Yes, and you could probably add another grouping that Mel was part of. Years ago I can remember a very brief excursion to the world of public ownership (think it was under Mike Watterson? ). From what I remember, it wasn't a roaring success (didn't survive very long anyhow). Much better for it to be our club ,than be our club. I mean,who wants to buy shares, subscribe to rights issues to fund transfers and operating cash deficits, when you can simply sit back and stick the boot into local (lifetime fans) owner/s if things go wrong.

Hell, you can even ask for board representation.

[G STAR RAM]

On 17/03/2018 at 16:24, Papahet said:

Rush left in May.

Pearce, Thorne and Forsyth all handed new deals in the last 4 months.

Jamie Hanson offered new terms -another player nowhere near the standard required. 

Russell was offered improved terms, glad he left because he didnt warrant a better deal here for another 3 years on most likely 20 odd grand a week.

Who agreed to Bent and Baird having extensions? 

Why was Rowett given a new deal so soon into his contract? 

Then Morris has the cheek to bemoan FFP every other sentence at these fan forums. Stop bloody wasting money on new contracts for Alex friggin Pearce and Chris Martin then.

Wouldn't MM be giving these contracts based on advice from his manager?

[Day]

Ouch! 

 

[SecretDave]

48 minutes ago, The Key Club King said:

This concerns me too. If we miss the play-offs after falling from second place then there will be a lot of discontent and I fear many people will turn against the owner like they did with Lionel Pickering.

That's half the problem with Derby, the so called fans turning on the man that has invested a fortune in to our club.  Turning on the manager and the players that have got us in to the top 6 in the table. I wish these so called fans would go away and support someone else, like the team up the A52!

Try following a club such as Blackpool or Coventry City, then we'd know what it's like to have terrible owners and no prospect of ever achieving anything decent.

What we've got at Derby is pretty good when you look at the bigger picture. No, it might not be Premier League just yet, but we're a very competitive Championship team. I'll happily take that right now and I'm happy to back Mel, Gary and the boys. COYR!

[RamNut]

11 hours ago, ramblur said:

I'm sure he would have , because we spent an all in total of c£30m on players' regs, allied to a large hike in wages . I'm sure he wished he'd only put in £15m!

The catalogue of bad decisions, as you put it, arose mainly because he backed a head coach to the hilt. If you think he should have interfered in the transfers, then I'm sure there would have been an enraged outcry on here.

I remember him saying that he personally had misgivings about the CM loan in 16/17, but allowed his manager to manage.

I didn't see many catalogues being brandished by fans in 15/16.

Whilst I don't like to speak favourably of the gumps, I was a bit disgusted that the late Nigel Doughty ended up being almost reviled by a section of their fans. From afar I got the impression that here was a genuine, integrous guy who loved the club he supported and did everything in his power to try and improve its status. It didn't work out,but that's football for you. He put a hell of a lot of money in , and I know that he didn't expect to get the majority of his money back because of a string of impairments in one of the group accounts ( impairments can be reversed, especially if promotion were achieved)...........and,of course,the family didn't get it back.

I think Mel has already put in more than Nigel, but here we go again,by the looks of it.

£30m?? blimey.

Looking back the 13-14 squad was threadbare. The team was reinforced by loan signings. The reserves were not very good. In 14-15 they set about addressing that and spent about £3.5m in the summer on thorne, christie, and dawkins, and a further £1.65m in the winter on shotton and albentosa. The reserves were rebuilt with mitchell, ssewankambo, warnock, whitbread, bunjaku, klobenz, santos, calero, and macdonald without spending much at all.  The jan 15 winter deals are where it starts to go wrong.

in the summer of 15-16 we signed Pearce and shackell not long after having already signed shotton and albentosa. Carson and baird arrived at low cost. Bent was free but was apparently on big wages. we added Ince (£4.75m) and weimann (£2m), but were then really unlucky with injuries to hendrick, hughes and bryson, especially with george still coming back from his ACL. Its totally understandable that we went out to buy two midfielders. Its just that £10m on johnson and butterfield was poor selection and a lot of money. the only notable alternative was barry bannon who would have been better - and cheaper. In january Mel backed clement with blackman, olsson and camara at £5m. 

In the summer of 16 we appointed Pearson and set about smashing up the team. Vydra £8m  to replace martin, and wilson on loan when we've just signed blackman and bent. Anya £4m was another poor buy. Then when mac returns and signs nugent as well.

so there were several well documented factors - injuries, lack of depth, and managerial changes, but ultimately its a lack of strategy and overreaction to events. A net £40m spend in three seasons?

this season we have had to address that overspend but spent the majority of the ince fee on huddlestone, lawrence and jerome. Christie paid for wisdom. The only real income was hughes sold for a paltry fee. So overall i don't think we've been able to do much to address the overspending, and thats why i think vydra will still have to go if we don't go up, and money will be tight. I think we can forget those summer transfer suggestions of players like ryan woods. Jordan graham on a free is much more like it. 

Despite all the spending we will end up with a team that is worse than what we started with. The academy will fill the gaps with u23 graduates, and to be honest i think we are ready to see some home grown talent rather than witness more heavy spending.

[UTFR]

3 hours ago, ramblur said:

Back to the serious stuff then, after my fun (for me) in another thread.

Yep, to me your first point is the main worry I have. If an expensive player was secretly intending to see out his contract , and maybe get a juicy signing fee elsewhere, we might not get an inkling till it's too late. Happily though,this doesn't seem to happen all that often in football.

Your second point has come up before. Whilst you can revalue tangible assets upwards (as we did with PP ) , and thus create a gain (not to P/L though), I'd be very surprised if you can do the same for intangibles . However, as I've said before,I'm not up to speed on current financial regs (and don't intend to be - worse than reading 'War and Peace' backwards ).

I reckon you're probably almost right on Hughes, except for the fact that agents' fees relating to contracts (including extensions) are capitalized (i.e. form part of the value shown in intangibles, in this case). Thus his 'carrying value' probably equated to the sum of such fees.

Damn it - I've just noticed another of those blasted autocorrect? zs 

Do you think we would be able to revalue an intangible asset favorably if we had reasonable back up.

If we say, knocked back a couple of high bids for Vydra, from competing premier league sides, because we want to keep him. Do you think this would be sufficient "back up" to make this kind of adjustment?

Player values seems to be so inconsistent and fickle, must be impossible to ever really have a true value on the books.

[ramblur]

2 hours ago, RamNut said:

£30m?? blimey.

Looking back the 13-14 squad was threadbare. The team was reinforced by loan signings. The reserves were not very good. In 14-15 they set about addressing that and spent about £3.5m in the summer on thorne, christie, and dawkins, and a further £1.65m in the winter on shotton and albentosa. The reserves were rebuilt with mitchell, ssewankambo, warnock, whitbread, bunjaku, klobenz, santos, calero, and macdonald without spending much at all.  The jan 15 winter deals are where it starts to go wrong.

in the summer of 15-16 we signed Pearce and shackell not long after having already signed shotton and albentosa. Carson and baird arrived at low cost. Bent was free but was apparently on big wages. we added Ince (£4.75m) and weimann (£2m), but were then really unlucky with injuries to hendrick, hughes and bryson, especially with george still coming back from his ACL. Its totally understandable that we went out to buy two midfielders. Its just that £10m on johnson and butterfield was poor selection and a lot of money. the only notable alternative was barry bannon who would have been better - and cheaper. In january Mel backed clement with blackman, olsson and camara at £5m. 

In the summer of 16 we appointed Pearson and set about smashing up the team. Vydra £8m  to replace martin, and wilson on loan when we've just signed blackman and bent. Anya £4m was another poor buy. Then when mac returns and signs nugent as well.

so there were several well documented factors - injuries, lack of depth, and managerial changes, but ultimately its a lack of strategy and overreaction to events. A net £40m spend in three seasons?

this season we have had to address that overspend but spent the majority of the ince fee on huddlestone, lawrence and jerome. Christie paid for wisdom. The only real income was hughes sold for a paltry fee. So overall i don't think we've been able to do much to address the overspending, and thats why i think vydra will still have to go if we don't go up, and money will be tight. I think we can forget those summer transfer suggestions of players like ryan woods. Jordan graham on a free is much more like it. 

Despite all the spending we will end up with a team that is worse than what we started with. The academy will fill the gaps with u23 graduates, and to be honest i think we are ready to see some home grown talent rather than witness more heavy spending.

 

 

 

  

 

Almost totally agree with your last point and almost think it would be a good idea if some U23 promotion was actually forced. I made this biblical analogy some time ago ('No man may serve 2 masters etc') . It seems to me that we can't (or don't want to) serve the 'master' of trying to be promoted, whilst also trying to serve the other 'master' of introducing youth. As has been mentioned before, I thoroughly agree that it's highly unlikely that Will or Jeff would have been introduced in the current climate, so how many more Wills and Jeffs are there that aren't getting a chance? If all these high spending periods all fail, I think it might be a time for a rethink.

I've been very lucky (and I think you have too) to have seen the good times, but over my period of support I've seen very little youth introduced, and perhaps I'm being selfish in wanting to complete my 'portfolio' before I snuff it. However, I'm not just suggesting youth for the sake of it, as I genuinely feel we've got some who deserve a chance. Maybe the injection of a bit of enthusiasm and great desire to succeed (to further their careers and earn enhanced wages) is what we need, mixed in with the rest.

Although I can think of relatively few from the past, the thing that struck me was how big a success rate we had with those few. I apologise for any I miss out (and ignoring the Storer/Ward days that produced a few), I came up with this list:-

Steve Powell, Colin Boulton, Jeff Bourne, Dave Langan, Pete Daniel (given a chance at CH),Craig Ramage, Chris Rigott, Malcolm Christie, Will and Jeff. Not really that many in about 50 years! Of course Phil Boyer wasn't given a chance, but did very well elsewhere. The other thing that struck me was that all of the above were given good runs in the side ( and I don't remember us losing many/any games because of their introductions. Apologies to big Rog, because I've missed him out (by accident).

Jamie and Mason haven't had good runs in the side, although Mason was very unlucky to get injured just as he was beginning to show signs.

Heavens, we might have introduced more in the Storer/ Ward days.

Going back to 15/16, the actual figures from the accounts (which I trust more than the 'thought to be/believed to be' stuff) were:-

Fees £26.647m,  Transfer levies/agents' fees (don't think there was compensation paid to other clubs to engage manager/coach, though  I might be wrong there)  £3.308m       Total £29.955m. I think you may have missed the middle element from your analysis. Looking back through your post and seeing everything set out, I'd admit it does seem a bit of a mess. Don't want to single a manager out, but just to add a rider to what you said about the young players Mac signed, they may not have cost much in fees, but the wages add up. None of them made it (bit unfair on Mitchell,by me) and they took up places in the Academy that could have gone to others.

Just realized I've missed out that beefy midfielder, whose name eludes me, Giles Barnes, 2 Clough era CBs, and that fair haired defender from years ago that's on the tip of my tongue (decent player).

[ramblur]

1 hour ago, NoLoRam said:

Do you think we would be able to revalue an intangible asset favorably if we had reasonable back up.

If we say, knocked back a couple of high bids for Vydra, from competing premier league sides, because we want to keep him. Do you think this would be sufficient "back up" to make this kind of adjustment?

Player values seems to be so inconsistent and fickle, must be impossible to ever really have a true value on the books.

Agree with your last point, but you can only do the best you can. I'm almost certain you couldn't put in a residual value higher than the initial cost (not much point anyway, as initial cost already rules out amortization , unless book value impaired). If you mean revalue the asset up from cost, that's a no go, but it can be impaired from its carrying value.