Fulham requires big funding from owner

After lengthy delays, Fulham’s shiny, new Riverside Stand has finally opened, creating “a unique Thameside destination with first class facilities for supporters and partners on match days, as well as for the wider community year-round”.

This ambitious project has increased Craven Cottage’s capacity by around 4,000 to 29,600, while it has also taken advantage of the club’s fantastic location and wealthy catchment area by including two Michelin star restaurants, a rooftop swimming pool, corporate hospitality and event space, all benefiting from views of the Thames.

Chief executive Alistair Mackintosh observed, “Fulham is the sort of club that can have a business class or first class and have fans that turn left on a plane.”

Indeed, there is also an exclusive members club – with a football season ticket as an optional extra. It’s fair to say that “the times they are a-changing”, as this is a long way from the traditional pie and a pint.

However, in a world where clubs face the twin challenges of competing with wealthier rivals and complying with Profitability and Sustainability Regulations (PSR), this development does make sense – even though the payback on a substantial investment costing an estimated £350m will take a considerable time.

A review of Fulham’s finances helps explain why the Riverside development is so important to the club’s business model, using the most recent accounts. These are from the 2023/24 season, when they finished 13th in the Premier League, while also reaching the semi-finals of the Carabao Cup, before losing to eventual winners Liverpool.

Fulham’s pre-tax loss widened from £26m to £33m, despite profit on player sales rising from £9m to £33m. Revenue “remained consistent” at £182m, but there was a sharp increase in operating expenses, which shot up £34m (15%) from £217m to £251m.

There was good growth in both commercial, which rose £6m (26%) from £23m to £29m, and gate receipts, up £3m (21%) from £15m to £18m. However, this was offset by a £9m (7%) reduction in broadcasting from £144m to £135m, due to finishing three places lower in the Premier League.

Player sales

Up until last season, Fulham had not made much money from player sales, generating a profit of just £21m in the three years before then. Furthermore, they have only exceeded a £20m gain on three occasions.

Fulham made £33m from player sales, which is a new club record, mainly thanks to the big money sale of Aleksander Mitrovic to Saudi club Al-Hilal.  Even after significantly increasing the profit compared to the previous season, this was still towards the lower end of the Premier League. Nine clubs made more than twice as much, with four of them generating more than £100m, namely Chelsea £152m, Manchester City £139m, Brighton £110m and Nottingham Forest £101m.

This season will also be decent, following the sales of Joao Palhinha to Bayern Munich and Jay Stansfield to Birmingham City, with the club advising that it has made £43m profit from player sales.

 

Losses are nothing new for Fulham, as the last time they made a profit was way back in 2010/11. Since Shahid Khan bought the club in July 2013, they have posted £417m of losses, averaging £38m a year.

The club has been hindered by its policy of buying older players with Premier League experience, which helps its prospects in the short-term, but is not conducive to large player trading profits.

Long term losses

Losses are nothing new for Fulham, as the last time they made a profit was way back in 2010/11. Since Shahid Khan bought the club in July 2013, they have posted £417m of losses, averaging £38m a year.  This includes more than quarter of a billion Pounds in the last five years alone, when the owner twice absorbed huge losses in a bid to return to the Premier League as soon as possible, then continued to lose money in a bid to survive in the top flight.

Fulham’s £257m loss in the last five years is one of the highest in England, with only five clubs in the Premier League having a worse performance, though some lost a lot more, especially Everton £442m and Manchester United £358m.    Only four Premier League clubs have made a higher operating loss than Fulham’s £337m in the last five years, though their West London neighbours Chelsea lost a staggering £926m.

Broadcasting is by far the most important revenue stream, accounting for 74% of total income, followed by commercial 16% and match day 10%.   Fulham’s £182m revenue is still firmly in the bottom half of the top flight at 14th highest, sandwiched between Everton £187m and Wolves £178m.   For some more perspective, they were miles below the Big Six, four of whom generated more than three times as much as the Cottagers: Manchester City £715m, Manchester United £662m, Liverpool £614m and Arsenal £614m.

Even though they might be no great shakes in the Premier League, Fulham were 28th in the Deloitte Money League, which ranks clubs globally by revenue, i.e. not far behind a famous old club like Benfica.

Despite last season’s increase, Fulham’s 24,311 attendance remains one of the smallest in the top flight, only higher than four clubs, namely Burnley 21,153, Brentford 17,082, Luton Town 11,276 and Bournemouth 11,108.

Fulham have said that the new Riverside stand will create important new revenue streams, but they have not quantified how much they expect this to deliver.

Ticket prices have attracted a lot of attention at Fulham in the past few years. These were frozen in 2021/22, but there have been rises every season since then, including a couple of significant increases: 10% after promotion in 2022/23, followed by an even bigger 18% in 2023/24.

The prices in the new Riverside Stand are even more striking, as the cheapest is £1,250, while the club has also introduced a new Platinum level at £3,000, which is the most expensive seat in the Premier League outside corporate hospitality.

Fulham’s wage bill rose £16m (11%) from £139m to £155m, which was another club record. In fact, their wages have significantly increased by £65m (71%) since promotion from the Championship two years ago.  Fulham’s £155m wage bill was the 12th highest in the top flight, just behind Everton’s £157m.   Fulham’s 85% wages to turnover ratio was actually the second worst ratio in the Premier League.

Fulham’s other expenses rose £5m (18%) from £31m to £36m, so these have more than doubled in the two years since promotion. The costs of operating in the Premier League are invariably higher than the Championship, but all clubs have been adversely impacted by the impact of high inflation on services and utilities.

This was yet another all-time high for Fulham, but still on the low side in the top flight, miles below the likes of Manchester City £190m, Liverpool £167m and Tottenham £159m.   This cost category is likely to further increase as a result of the new facilities offered in the Riverside Stand (which will also be the case for depreciation).

Transfer spending

Fulham spent £88m on player purchases, mainly on Alex Iwobi from Everton, Calvin Bassey from Ajax, Timothy Castagne from Leicester City and Raul Jimenez from Wolves. In addition, Adama Traore arrived from Wolves on a free transfer, while Armando Broja was signed on loan from Chelsea.   Although this was the club’s second highest ever outlay, it was still pretty low for the Premier League, with six clubs spending more than £200m, led by Chelsea £553m, Tottenham £272m and Arsenal £256m.

Fulham have been fairly consistent in their player purchases in the last two seasons, averaging £87m. This means that they have spent £302m on player purchases in the last five years, which is around 50% more than the £206m outlay in the preceding 5-year period (including £120m in 2018/19 alone9, so they have really ramped up their activity in the transfer market.

Even though Fulham have increased their spending, this is still nowhere near the big boys. Looking at player purchases for the last five years, Fulham only spent more than five other Premier League clubs, namely Crystal Palace, Burnley, Brentford, Sheffield United and Luton Town.

Debt, interest payments and funding

Fulham’s gross debt significantly increased from just £1m to £125m, as this was the first time in seven years that Shahid Khan did not convert his loans into equity, though £75m was converted after these accounts closed.

An incredible £907m of debt has been “written-off” in this way since 2012: £695m by Khan plus another £212m by former owner Mohamed Al Fayed. Otherwise, Fulham’s debt would be absolutely enormous.

Immediately after these accounts Fulham took out a £125m loan facility with JP Morgan Chase in relation to the completion of the Riverside Stand, repayable within five years. Interest is charged at SONIA plus 3.625%, so currently around 7.7%.

To date, thanks to the regular debt conversion, Fulham have paid hardly any interest on their loans, e.g. only £0.3m in 2023/24, while others have had to shell out much higher sums, especially Everton £44m, Manchester United £36m and Tottenham £29m.

Looking at the holding company, Cougar Holdco London Limited, Khan has provided Fulham with an incredible £863m of funding, all of which has been converted to equity, including £530m in the last five years alone.

This works out to an average of £78m a year since he bought the club in 2014, so he has essentially signed a cheque for around £1.5m a week ever since his arrival at Craven Cottage, which is a great deal of money by anyone’s standards.

In fact, in the last five years, Khan’s £530m funding was the second highest of any owner in the Premier League, only surpassed by Chelsea. However, that was more than all the other aspirational clubs, including Aston Villa, Everton and Newcastle United.

The club is fortunate that its owner Shahid Khan continues to provide significant financial support. The likelihood is that this funding is going to be required for some time yet.

After yesterday's win Fulham still have a chance of playing in Europe again so good luck to them.   If I win a decent prize on the Premium Bonds, I might treat myself and my partner to hospitality in the Riverside Stand!