What does the Swiss Ramble do at the weekends? Does he leave Zurich to ski or walk in the mountains? Does he go for yodelling lessons? No, he tirelessly works away at interpreting a club’s latest accounts and this week it is the turn of Leeds United. He tweets his findings rather than putting them in a blog format, so I consolidate them so that more can benefit from his insights.
I have argued that
for many years a vibrant regional capital like Leeds deserved to be represented
in the top flight. The Swiss Ramble
states: ‘Promotion to the Premier League has clearly transformed Leeds
finances, even when impacted by COVID (though the loan write-off also helped).
Leeds enjoy a structural competitive advantage from being the only club in UK’s
third biggest city, leading to good commercial prospects.’
2nd highest
profit in Premier League
Leeds swung from
a £62m pre-tax loss in the Championship to £26m profit in the Premier League,
thanks to revenue more than tripling from £54m to club record £171m, though
competing in the top flight increased expenses by a third (£44)m. Bottom line
boosted by £21m loan write-off.
The 2021 £26m profit is the first they have reported since
2017 – and that was only £1m. Losses had been increasing following the arrival
of owner Andrea Radrizzani, as Leeds invested big sums to help secure
promotion, leading to £84m deficit in the previous two years.
£26m profit is 2nd highest in the Premier League, only below
Wolves £145m (£127m loan write-off). Even if Leeds’ £21m waived loan were
excluded, net profit would still be £5m. A full year of the pandemic meant some
very high losses, e.g. Chelsea £156m, Arsenal £127m.
Leeds were one of only two Premier League clubs to make an
operating profit in 2021 (excluding player sales and loan waiver) with their
£6m surplus a significant improvement on £65m loss in the Championship.
Big growth in revenue
The £171m revenue is six times as much as 2015 £24m low in
the Championship. Obviously most of the growth has been driven by broadcasting,
up £129m due to PL TV deal, but commercial has also increased £25m to £36m. It
would have been higher without COVID fall in gate receipts.
Club revenue is the 12th highest in the Premier League,
sandwiched between Villa £184m and Saints
£171m revenue was enough to secure them 23rd place in the
Deloitte Money League, which ranks clubs globally. This put them just behind
Sevilla £177m, who have won the Europa League six times, but ahead of AS Roma
£169m and Atalanta £166m.
Main driver of the £117m revenue increase was broadcasting,
up £124m from £9m to £133m, due to much more lucrative Premier League TV deal,
though commercial also grew £2m (6%) to £36m. This offset the COVID driven
reduction in gate receipts, down £10m (83%) to just £1.9m.
Broadcasting income shot up by £124m from £9m to £133m, the
club’s highest ever from this revenue stream. Although they did not benefit
from revenue deferrals in the same way as other clubs, their merit payment was
boosted by Bielsa guiding them to 9th.
Commercial income rose £2m (6%) from to £36m, mainly driven
by merchandising sales, up a third from £15m to £20m. It would have been higher
without £4m fall in catering (due to COVID). Even so, it is the 9th highest in
the Premier League, though £100m below 6th placed Arsenal.
COVID meant that the clb lost £22.8m profits in 2020/21, due
to significant losses in match day (ticketing, concessions & hospitality),
stadium events and conference & banqueting.
Player sales and
spending
The profit would have been even higher if they had sold some
of their talent. As it was, profit on player sales fell from £10m to a £1m
loss. Unsurprisingly, this was the worst player trading result in the Premier
League, miles below Man City £69m.
Leeds have made very little from player sales, actually
registering a £1m loss in 2021. Their £51m profit in last 5 years is on the low
side for the Premier League (though in Championship for most of that time). It
will be similar this season, as departures mainly free transfers.
The club spent
£99m on player purchases, as they “invested significantly” to bring in Rodrigo
from Valencia, Diego Llorente from Real Sociedad, Rapinha from Rennes and Robin
Koch from Freiburg. This was 8th highest in the Premier League as the club
strived to be competitive. Radrizzani
has loosened the purse strings at Leeds since his arrival, leading to gross
transfer spend of £195m in the last 5 years (£145m in last 2 years alone),
compared to only £21m in the preceding 5-year period. Still very low compared
to other Premier League clubs.
Average attendance of 35,321 (for games played with fans)
was comfortably the best in the Championship and would have placed them above
half the clubs in the Premier League.
Leeds signed “record-breaking” new sponsorship deals in
2020/21. Betting firm SBOBET shirt sponsorship is worth £6.5m a year, while
Adidas replaced Kappa in a five-year kit supplier deal, reportedly as high as
£10m. Sleeve sponsor JD Sports and training kit partnership with Clipper.
Wages and debt
Wages rose significantly by £30m (38%) from £78m (including
£20m promotion bonus) to £108m, so they are 5 times as much as £21m just 4
years ago. Only covers 11 months, so would have been £118m on an annualised
basis, which means 63% growth on an underlying basis.
Despite the increase, the £108m wage bill is the second
lowest in 2020/21 Premier League to date. Even if we take the £118m wages (for
annualised 12 months) this would still place them firmly in the bottom half of
the table.
The wages to turnover ratio decreased (improved) from 144%
to 63%, the club’s lowest for five years and one of the best in the Premier
League. It would obviously be higher if the wage bill covered 12 months; on the
other hand, ratio was adversely impacted by COVID revenue losses.
Gross debt rose
£17m from £38m to £55m, including £34m external loans (secured on TV money),
£20m from related parties and £1m finance leases. Would have been higher
without the owners waiving £21m of loans and converting £8m of debt to capital
in 2021 (£28m since 2015).
By the Swiss
Ramble’s calculations, Leeds have no
problems with Premier League’s Profitability & Sustainability rules, as
their losses over 3-year monitoring period are well within the limit after
making allowable deductions for academy, community & infrastructure,
promotion bonus & COVID impact.
Sources of funds
In the last decade Leeds have received £127m funding from various owners (£55m share capital and £71m loans). This has mainly been spent on players £50m (net), capital expenditure £29m, funding operating losses £21m and £8m interest.
Most of the owner funding has come in the last five years, though the £91m provided is not that high in the Premier League. Over that period those with the highest financing are aspirational clubs similar to Leeds, e.g. Everton £448m, Villa £400m and Fulham £347m.
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