For the second year in a row, Leicester lost around £90m, though the pre-tax loss very slightly improved by £2m. The hefty loss was registered in spite of profit from player sales rising by £66m from £9m to £75m.
Leicester have now reported five consecutive years of
losses, adding up to more than £300m, which is in stark contrast to the four
years of profits that they generated after promotion to the Premier League in
2014, amounting to £137m.
This was offset by the worse on-pitch performance, which led
to revenue dropping £37m (17%) from £214m to £177m, exacerbated by operating
expenses increasing £31m (11%) to £330m.
In contrast, net interest payable was cut by a third from
£19m to £12m, mainly thanks to King Power converting £195m of loans into
equity.
The main reason for the revenue decline was broadcasting,
which fell £36m (24%) from £151m to £115m, due to a reduction in Premier League
merit payments and the club’s absence from European competition for the first
time in three years.
The lack of European matches also drove a £2.6m (13%)
decrease in match day from £21.0m to £18.4m. However, commercial rose £2m (5%)
from £42m to £44m.
Leicester’s £90m pre-tax loss is clearly not great, but it
is worth pointing out that they are far from alone in posting a large loss, as
half of the Premier League lost more than £50m last season. Indeed, three clubs
lost even more than Leicester, namely Aston Villa £120m, Tottenham £95m and
Chelsea £90m.
Player sales
Leicester’s overall loss is even more concerning when you
consider that they benefited from £75m profit from player sales, up from just
£9m in the previous season. This was actually a new club record, surpassing the
old high of £63m in 2019/20.
The business model was clearly to sell a big name each
season to one of the Big Six clubs (often to Chelsea) to help balance the
books: N’Golo Kanté, Danny Drinkwater, Riyad Mahrez, Harry Maguire and Ben
Chilwell. According to Transfermarkt,
Leicester have made decent money from player sales this season, including the
transfers of Harvey Barnes to Newcastle United and Timothy Castagne to Fulham. There is also a strong possibility that
Leicester will look to offload some of their players at the end of this season,
i.e. before the end of the 2023/24 accounting period, to help the club comply
with Financial Fair Play targets.
It is clear that revenue is well down on the club’s £233m
peak in 2016/17, which included £70m from the Champions League. Since those
heady days, it has dropped £56m (24%), due to a £76m reduction in broadcasting
income, partly offset by growth in both commercial £19m and gate receipts £2m. To highlight the challenge faced by ambitious
clubs like Leicester, all of the top five clubs earned at least three times as
much, while Manchester City’s £713m was more than half a billion higher than
the Foxes.
Leicester’s Premier League TV distribution will be replaced
this season by a parachute payment of around £44m. If they don’t get promoted,
this will reduce to £36m in the second year, then £16m in year 3.
Even though revenue slumped, Leicester’s wage bill increased
£24m (13%) from £182m to £206m, which means that this grew by an incredible
£87m (73%) in just five years.
However, last season’s total was adversely impacted by two
technical factors, as it included:
- “significant”
costs for the sacking of Brendan Rodgers, the highest paid manager in the
club’s history, which were “unplanned”.
- additional
costs following the extension of the accounting year-end.
Leicester’s wages have usually been a cut above the rest of
the mid-tier clubs in the Premier League. While some others have also seen good
growth since then, Leicester’s were still the highest of that group last
season.
As a result, Leicester’s £206m wages were the seventh
highest in the top flight in 2022/23, only behind the Big Six clubs. Indeed,
they have been in this elevated position for the last three seasons – and the
one before that they were 8th.
Leicester’s 116% was the highest (worst) wages to turnover
ratio in the Premier League, a fair way ahead of the two other clubs that have
been charged with breaches of the Profitability and Sustainability Regulations,
Nottingham Forest 94% and Everton 92%. Leicester’s
wages should be much lower this season following the large number of departures
last summer. Even when players left on a free, this still reduced the payroll.
In addition, you would have to assume that at least some of the players had
relegation clauses in their contracts.
In the last six years, the majority of Leicester’s funding
has come from loans, split between £255m from the owners and £64m from banks,
while another £44m came from dipping into cash reserves. A substantial £153m
has been invested in infrastructure, mainly the new training ground, while
£151m (net) was spent on improving the squad. Another £45m was used to cover
operating losses, while £15m went on interest payments.
Since King Power acquired Leicester City in August 2010, the
owners have put in an incredible £444m, including over quarter of a billion in
the last four years alone.
Six point deduction
likely
Leicester have been charged by the Premier League with
breaching its Profitability and Sustainability Regulations (PSR) for 2022723.
This brought a strong response from the club: “Leicester
City is surprised at the actions the Premier League has taken. The club is
extremely disappointed that the Premier League has chosen to charge LCFC now,
despite the club’s efforts to engage constructively with the Premier League in
relation to the matters that are the subject of this charge, even though LCFC
is not currently a Premier League club.”
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