Reader Douglas McNeill wrote the following about Fulham’s Finances. Enjoy…
With Euro 2012 over, the summer transfer market will soon be getting underway in earnest. So I thought that it might be instructive to take a look at Fulham’s finances. I earn my living in the City analysing the finances of listed companies, and a football club isn’t so very different.
Apart from the fact that the transfer window is open, there are a couple of other reasons why it’s worth examining this subject. First, the ideas associated with ‘Moneyball’ often come up for discussion on this site. It might help us if we knew more about the kind of money Fulham has available to play this intriguing game. Second, recent events at Glasgow Rangers suggest that conventional sports journalism is ill-equipped to hold club owners to account over their financial stewardship. Heaven forbid that Fulham should ever go the way of Rangers – but if it did, it might help if fans were asking awkward questions before the point of no return was reached.
This isn’t the first blog entry about football finance: take a look at the excellent Swiss Ramble and AndersRed for some superb examples. But I want to take a slightly different approach. First, I want to focus less on profits and more on cash flow. That’s because profitability in football is hugely skewed by the depreciation of transfer fees, and its cousin – transfer market profits and losses. For me, it’s more meaningful to look at the amount of cash coming in and going out – and I fancy that MAF thinks in those terms too.
Second, I want to try and do a bit of forecasting. Unlike listed companies, which have to report financial results pretty soon after their fiscal year ends, football clubs usually take months to file their accounts at Companies House. Fulham’s financial year ends on 30 June, but the accounts don’t typically appear in public until the following February or later. I think that some intelligent speculation is in order to fill that gap – and help us think about our prospects in the summer transfer window.
So, what is there to say about the finances of ‘Fulham Football Leisure Ltd’? Here are ten observations.
1. Chairman Mo has been wonderfully generous – but not recently. His last big cash injection was in 2007-08, the season of the Great Escape. He put in over £20m that year, mostly to fund Sanchez’s summer spree in the transfer market – Kamara, Davis, Konchesky, Baird, and others. Hodgson spent some more when he arrived in the January, on Hangeland and (Eddie) Johnson. The fees weren’t disclosed, but it looks to me as though they cost about £3m in total.
2. Since then, outgoings have more or less been matched by income. And that’s despite at least one relatively costly signing in each season: (Andy) Johnson in 2008-9 (the 7th place finish); Duff in 2009-10 (Hamburg); Dembele in 2010-11 (the Hughes year); and Ruiz in 2011-12. A self-sufficient football club – now there’s something you don’t see every day!
3. The Europa League has been good to us. Sure, it doesn’t bring the kind of riches you get in the Champions’ League. But we did make £12.5m out of the run to Hamburg, and I reckon we would have made £8-9m this season, despite going out at the group stage. That’s because the bulk of the TV revenue is awarded just for getting to the group stage – and the lion’s share of it goes to clubs from countries with large TV markets, like England. So that’s £20m over the past three seasons. To put that in context, it’s roughly the amount we paid to buy Duff, Dembele and Ruiz. Without the Europa League, would we have those players?
4. But most of the money comes from the Premier League. About half of it, in fact, just for taking part. Then roughly another quarter comes from gate receipts – mostly league games, of course – and the Sky/ESPN/BBC deals.
5. Our players earn about 40 grand a week. That’s my best guess, anyway. We know that about two-thirds of the club’s income goes on pay – for everyone at the club, not just the players. Invoking the old 80/20 rule, for want of anything better, would suggest that the playing squad is collectively paid about £40m. That’s for about 60 players (!) and again, I’d guess that 80pc of it goes to the 20-odd leading players. In which case, they’re getting about £40,000 a week, on average. That ties in which press reports I’ve seen regarding the wages of Duff and Zamora, before he left. Just remember – the average at big clubs is probably at least twice that.
6. Jol has probably balanced the books in his first year. Ruiz and others cost about £15m, and Zamora, Greening and Dikgacoi brought in about half that, leaving a shortfall that was covered by the Europa League proceeds. But they won’t recur in this coming season, so…
7. …Jol might have to bring in £5m more than he spends in the transfer market this year (i.e. the summer window plus the January window). That’s what I think it would take to keep cash inflow in line with cash outflow. Of course, MAF may decide that he’s willing to cover a net cash outflow. Otherwise, a plausible scenario is that Jol raises £20m by selling Dembele and Dempsey, and gets to spend £15m of it.
8. Alternatively, he could achieve much the same effect by not replacing the big earners who have been released this summer (Johnson and Murphy). If they were on 40 grand a week, they’d have getting on for £5m a year between them. That wouldn’t prevent Jol making other new signings – they’d just have to be on packages similar to the other players we’ve released (Grygera, Riise BH, Sa and the Pog). It’s a fair bet that 31-year old Mladen Petric falls into that category.
9. All this was probably the scenario that Hughes could see coming a year ago. So when he talked about “lack of ambition” perhaps that’s what he had in mind.
10. Change is afoot. First, there’s the Premier League’s monster new broadcasting deal with Sky and British Telecom. Second, there’s our proposed stadium expansion. If there’s enough interest, I’ll write on another occasion about how these developments might affect Fulham’s fortunes – and the money at Jol’s disposal.