Leicester continue to post profits

The authoritative Swiss Ramble has analysed the 2017/18 accounts of Leicester City. He notes, 'Since King Power acquired the club in August 2010, the owners have put in £186m (£106m share capital and £80m loans), while £121m has come from operations. Most went on player purchases £164m (net) and repaying old loans £115m, while the cash balance is up £26m.'

After eight consecutive years of losses (2007-14), Leicester's promotion to the Premier League has produced four years of profits, amounting to £137m. Obviously boosted by an amazing £92m in 2017, but the total also includes a very respectable £26m in 2015 and £16m in 2016. They had the highest profit (£92m) in the Premier League the previous season, but their 2017/18 profit of £2m is among the lowest reported to date, though in fairness it is considerably better than the losses made by three clubs: Watford £32m, Stoke City £30m and Everton £13m.

The Foxes generated £29m cash from operations in 2017/18, but then spent a net £50m on players, repaid £3m of loans and paid £1m of tax, which resulted in a cash outflow of £25m. The club has not needed any owner financing since promotion to the Premier League.

On a cash basis, the club's net spend has increased in the last four seasons to an annual average of £34m, much more than the £5m for 2008-14. Since these accounts closed, have spent a net £43m on new players, bringing in Maddison, Pereira, Söyüncü, Benkovic, Ghezzal, Ward and Evans. They splashed out £93m on player purchases in 2017/18 (including Iheanacho, Silva, Iborra and Maguire), though this was actually less than the £102m spent the previous season. Lower than the Big Six (except Spurs who are a special case), but also less than half of Everton £215m.

Profit from player sales between 2009 and 2015 was very low, averaging just £1m a year. However, this has grown to £29m average in past 3 years, including 16/17 sales of Kanté and Schlupp. Next year will benefit from Riyad Mahrez’s £60m sale to Chelsea plus Musa and Iborra.

The increase in Leicester City wages to turnover ratio to 75% means that this is the second highest (worst) in the Premier League of clubs that have reported to date, only below Everton 77%. This is not disastrous, but it is above UEFA’s recommended 70% maximum limit (or 50 per cent for Deloitte Sports Business). The £119m wage bill is currently the 8th highest in England, only behind the Big Six and Everton.

Their £159m revenue is the 10th highest revenue in England, having been overtaken by Everton, Newcastle United and West Ham. The gap to the Big Six is enormous, as Leicester generate less than half of 6th placed Spurs £379m, while they are £430m lower than first placed Manchester United £590m.

Commercial revenue was down 15% (£3.9m) from £25.7m to £21.8m, presumably due to success-related clauses. Despite recently winning the Premier League and a good performance in Europe, this is still a lot lower than the elite clubs, e.g. around a fifth of 6th highest Tottenham Hotspur.

Average attendance fell slightly (by 1%) from 31,893 to 31,636, which was the 10th highest in the top flight, sandwiched between Everton 38,797 and Southampton 30,794. Gate receipts fell by £3.6m (22%) from £16.5m to £12.9m, due to lack of Champions League matches, though partially offset by more home games in the domestic cups.

Their solitary, albeit very lucrative, season in the Champions League means the Foxes have the 7th highest earnings from Europe of English clubs in the last five years. The club has stated that it 'aspired to re-enter European competition in future', which is unsurprising, as they earned €82m (£70m) in 2016/17 for reaching the Champions League quarter-finals, second only to Juventus’ €110m, but more than Real Madrid got for winning it (€81m).

Leicester City had the 22nd highest revenue in the world in 2017/18, though they have dropped eight places from 14th in the Deloitte Money League, highlighting the importance of the Champions League. Their 78% reliance on TV money is higher than any of the clubs in the top 20.

The club's desire to 'reinvest in its long-term future' is highlighted by the ambitious plans for a new, state-of-the-art training facility (estimated cost £80-100m) and a proposed expansion of the East Stand at the King Power Stadium.

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The Political Economy of Football V2

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