Finances

[Gritty]

Apologies if this has been captured elsewhere but I think we're still in a bit of a hole.

Under Profit & Sustainability rules we can lose £39mn over three seasons.  The stadium sale was in the accounts for 2017/18 and so that helps us for 17/18, 18/19 and 19/20. After that, it's not a factor.

At the end of this season (20/21) we will submit our accounts (in November 2021) and we'll be measured on our losses over 18/19, 19/20 and 20/21. The 122 page EFL document reveals that in 18/19 we lost £31.5mn.  (!!!!!!!!!!!!!!) That means in 19/20 and 20/21 combined we can only lose £7.5mn without breaching the limits and getting a points deduction in 21/22.

With the exception of the year we had the stadium sale, we've posted losses every single year that I can recall. I find it highly improbable that we didn't lose more than £7.5mn just last season alone given we still had all the high wage earners and we presumably also had to write off various contracts (remember that Johnson, Blackman etc contracts were extended by a month so their value was written off in 19/20 rather than 18/19?).   So what does all this mean? It seems to me that we are going to have to either:

a) Sell a couple of the youngsters for serious cash

b) Sell Moor Farm to Mel 

c) Hope that because of Covid they relax the rules materially

d) Receive outside investment in form of equity stakes from new investors (not Mel). These count towards P&S for up to £6mn.  I don't think £6mn enough though.  We'd need multiple equity stakes from multiple new investors.

Lots of fans are clinging onto c).  I think this a dangerous assumption. If I was the EFL I may make an allowance for Covid (e.g. equal to amount of matchday revenue lost worked out on some average) but I wouldn't suspend it completely.  Any allowance would simply deal with lost revenue and not help address a fundamental issue that we need to raise lots of money to cover previous losses. I think b) unlikely. Mel seems to have reached his limit of how much he wants to put into the club.

I'm fearful that we will therefore have to sell Bogle and maybe Bird this season.

There may be a flaw in my logic. I hope there is! 

 

[Mucker1884]

9 minutes ago, Gritty said:

Apols...

 

Well, that stopped me in my tracks!

Now I'll never know what the post was about!   

[Gritty]

Should add the £15mn loan doesn't help for P&S purposes.  It's only equity stakes that help for P&S

[Gritty]

Just now, Mucker1884 said:

Well, that stopped me in my tracks!

Now I'll never know what the post was about!   

I think I must have edited for a typo when you looked at screen? Try refreshing

[G STAR RAM]

Think we have posted pretty similar thing at pretty much the same time here, stole each others thunder!

One thing I would say is that the 3 year cycle has now become a 4 year cycle so the timing of the sale of the ground helps us.

[Tyler Durden]

You missed out one scenario. We MUST get promoted to the Premier League this season.

No pressure Phil and Mel 

[FindernRam]

Here we are celebrating the win over the EFL and before the party gets going you pour doom and despondency over us.

You may be right!  But your timing stinks?

[Gritty]

21 minutes ago, G STAR RAM said:

Think we have posted pretty similar thing at pretty much the same time here, stole each others thunder!

One thing I would say is that the 3 year cycle has now become a 4 year cycle so the timing of the sale of the ground helps us.

I had completely missed that. That makes a difference. Pushes problem out by one season and we can spread sales and losses a bit more. But still very tight.

Could you point me towards that rule change?

[Day]

8 minutes ago, FindernRam said:

Here we are celebrating the win over the EFL and before the party gets going you pour doom and despondency over us.

You may be right!  But your timing stinks?

Season starts next week ? 

[sage]

46 minutes ago, Gritty said:

Apologies if this has been captured elsewhere but I think we're still in a bit of a hole.

Under Profit & Sustainability rules we can lose £39mn over three seasons.  The stadium sale was in the accounts for 2017/18 and so that helps us for 17/18, 18/19 and 19/20. After that, it's not a factor.

At the end of this season (20/21) we will submit our accounts (in November 2021) and we'll be measured on our losses over 18/19, 19/20 and 20/21. The 122 page EFL document reveals that in 18/19 we lost £31.5mn.  (!!!!!!!!!!!!!!) That means in 19/20 and 20/21 combined we can only lose £7.5mn without breaching the limits and getting a points deduction in 21/22.

With the exception of the year we had the stadium sale, we've posted losses every single year that I can recall. I find it highly improbable that we didn't lose more than £7.5mn just last season alone given we still had all the high wage earners and we presumably also had to write off various contracts (remember that Johnson, Blackman etc contracts were extended by a month so their value was written off in 19/20 rather than 18/19?).   So what does all this mean? It seems to me that we are going to have to either:

a) Sell a couple of the youngsters for serious cash

b) Sell Moor Farm to Mel 

c) Hope that because of Covid they relax the rules materially

d) Receive outside investment in form of equity stakes from new investors (not Mel). These count towards P&S for up to £6mn.  I don't think £6mn enough though.  We'd need multiple equity stakes from multiple new investors.

Lots of fans are clinging onto c).  I think this a dangerous assumption. If I was the EFL I may make an allowance for Covid (e.g. equal to amount of matchday revenue lost worked out on some average) but I wouldn't suspend it completely.  Any allowance would simply deal with lost revenue and not help address a fundamental issue that we need to raise lots of money to cover previous losses. I think b) unlikely. Mel seems to have reached his limit of how much he wants to put into the club.

I'm fearful that we will therefore have to sell Bogle and maybe Bird this season.

There may be a flaw in my logic. I hope there is! 

 

Doesn't it mean we would have lost £31m for that year if it wasn't for the stadium sale.

 

[G STAR RAM]

9 minutes ago, Gritty said:

I had completely missed that. That makes a difference. Pushes problem out by one season and we can spread sales and losses a bit more. But still very tight.

Could you point me towards that rule change?

https://www.getreading.co.uk/sport/football/football-news/reading-fc-championship-clubs-make-18833452

Reported here. Cant actually find anything on the EFL website unsurprisingly ?

[DCFC_Sloth]

The accounts are a funny thing to try and analyse, and most of us do not have the skills to do so properly. I do know that because of the covid situation the rules are being relaxed and it’s being extended to a four year cycle, so the stadium sale is still included.

The idea that we only have 7.5m of losses is immediately not right because of the addition of the 4m we received for Lampard in the next accounting period, so it’s up to 11.5m. I’m also not sure what instalments of fees we have coming in for players we have sold due to sales of players rarely being all the cash upfront. We’ve also severely cut down our wage bill so those large losses won’t happen again. The final thing is we changed the way we dealt with amortisation that season, which may have had an impact. 

What I’m getting at, is we don’t really know the full story as we don’t have all the knowledge or even information we need to make statements on the state of the club’s finances. As far as I’m aware, last season’s accounts haven’t been released yet, so the claims of losing 31m might not be as straightforward as they seem. We also have the way the club values it’s players, which might offset losses, I’m not sure how that works, but it could mean the youth players having a high value works against these losses.

If we sell the young players off now/at the end of the season before 21/22 starts, then we know we were in the mud, if not, then there is something else at play keeping us above board! 

[Donny Ram]

I would think the stadium sale negates the loss and also creates a surplus to offset subsequent years.

I”m hoping that this is the case and the club doesn’t get dragged through before the EFL cronies again ?

 

[NottsRam77]

36 minutes ago, FindernRam said:

Here we are celebrating the win over the EFL and before the party gets going you pour doom and despondency over us.

You may be right!  But your timing stinks?

Sums it up perfectly lol  

[MaltRam]

If Mel wanted to sink still more of his wealth into the club, and I won't blame him one jot if he didn't, then just technically, couldn't he find a foreign club and make a reciprocal arrangement with their owner to invest in each others clubs to the tune of the £6 mentioned above?

Or buy a foreign club as a vehicle to buy players and move them to Derby, or buy Derby's offcasts then loan them out?

I'm not advocating for anything of the sort, just asking if there aren't ways and means of circumventing these silly rules?

[Millenniumram]

It’s incredible really that we’re still making such massive P&S losses, despite not really making a net transfer loss in any season since the Clement one. I mean it must all come down to wages, but still it feels like it’s almost impossible to remain within the FFP regulations and actually compete. They really need looking at and loosening - or, better still, get rid of them altogether and let teams spend what they want to.

[Rev]

I wouldn't worry about it.

The EFL will scrap p&s rules soon enough, and replace them with a salary cap. They'll easily get the 2/3 majority vote needed for such a change.

[MaltRam]

4 minutes ago, Millenniumram said:

It’s incredible really that we’re still making such massive P&S losses, despite not really making a net transfer loss in any season since the Clement one. I mean it must all come down to wages, but still it feels like it’s almost impossible to remain within the FFP regulations and actually compete. They really need looking at and loosening - or, better still, get rid of them altogether and let teams spend what they want to.

I was in favour of FFP when all this stuf came in. I thought it would stop clubs getting lumbered with bad owners and the fans getting hurt. Wigan, Bury, Bolton and another example or two every year have nade ne rethink that.

Simon Jordan had it right on that Talk Sport interview that was posted the other day...fit and proper owners test needs to work, then let those owners run their club their way.

[therealhantsram]

5 minutes ago, Millenniumram said:

It’s incredible really that we’re still making such massive P&S losses, despite not really making a net transfer loss in any season since the Clement one. I mean it must all come down to wages, but still it feels like it’s almost impossible to remain within the FFP regulations and actually compete. They really need looking at and loosening - or, better still, get rid of them altogether and let teams spend what they want to.

There was a report this week that the EFL think they have a majority willing to vote for an 18m salary cap. 

What they can't get the clubs to agree on though is whether the cap should be instead of P&S or as well as P&S. 

(in League 1 and 2 they chose to replace P&S with the salary cap.) 

[Millenniumram]

2 minutes ago, Needlesh said:

I was in favour of FFP when all this stuf came in. I thought it would stop clubs getting lumbered with bad owners and the fans getting hurt. Wigan, Bury, Bolton and another example or two every year have nade ne rethink that.

Simon Jordan had it right on that Talk Sport interview that was posted the other day...fit and proper owners test needs to work, then let those owners run their club their way.

It’s clearly not doing the job it was designed to do. It was supposed to protect clubs... all it’s doing is protecting the clubs with parachute payments and giving them an unfair advantage over everyone else. Needs to go.