Fulham Finances

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.

***

25 thoughts on “Fulham Finances

  1. Love it, thanks. I keep waiting for Swiss Ramble to cover Fulham again but this was an easier read and I think I get this! Would love to see this kind of thing regularly.

  2. Many thanks for some fascinating professional analysis. I take from this that we are reasonably healthy and ‘self-sufficient’ which is encouraging in these days of overspending.

  3. Excellent piece, take these combined comments as ‘yes there is enough interest’. BTW – there’s a job going at Barclays.

  4. Yup, do keep writing, please. We need intelligent, insightful commentary just like yours…helps the Fulham Family understand the Club, and our fortunes, better. COYWs.

    ps do you read Hammyend.com and listen to Cottage Talk ?

  5. Really interesting read. I’d like to see more of this blog in the future regarding our cash in flow when we’re in The Champions League!! FTID.

  6. Good piece, thanks.

    Given our debt, our revenue streams and so on – how do you think we’d fare if the worst (relegation) should happen?

    (presumably badly since I’m assuming we’re very reliant on PL TV money).

    1. Yes, it would be an enormous blow. I’ll take a look at the question in more detail on a future occasion, but the bottom line is probably that Chairman Mo would have to decide whether he wanted promotion badly enough to put in a fair bit of cash.

  7. First and foremost: thanks for this and please follow it up when you have the chance. It does make sense to think in terms of cashflow, for the reason you state, on which basis it is reassuring that we are approx breakeven nowadays.

    You’re trying to keep it nice and simple and to deal in broad brushstrokes, but even on the basis I don’t think #4 will quite do. Please can you make it clearer and flesh it out a bit in the hoped for follow-up.

    On points 6-9 you are broadly plausible, but looking at http://www.uefa.com/uefa/management/finance/news/newsid=1661184.html makes me wonder if (and hope that!) that the effect of missing out on Europe may be a fair bit less than you imply.

    As for wages, these have something like doubled in a decade, haven’t they, and presumably will push on further with the new TV deal. However, that will in turn further raise the gap between the prem and the Championship and between this and most other leagues worldwide — making ourselves and the other less affluent prem clubs even more attractive than now in global recruitment terms.

    Anyway, your further thoughts on these topics and more — including the Riverside development — will be read with interest as and when time permits.

    1. Fair point – I’ll expand on #4 next time. The PL distribution system is worth understanding – basically, it matters quite a lot to us where in mid-table we finish. Tenth place means about £5m more in prize money than fifteenth.

      Good point re. wages and our ability to compete against most other clubs, here and abroad. It makes me wonder how useful our academy really is. I’m not sure we have a comparative advantage in spotting the stars of the future years in advance, but we do have a degree of comparative advantage in buying them once they’ve announced themselves.

  8. Yes, please do write some more! This is one of the very best articles I’ve read on Fulham. Fans need to understand that it’s about balancing the books (“not doing a Portsmouth”) and not Mo just dipping into his pocket year after year. True “ambition” is about still being here in ten years time, not a short-term flash in the pan. That requires a robust and credible financial plan. I think most of us will have worked out the bones of that but no club is ever going to publicise such matters and it’s so useful to have an insight from someone who works in theh field.

  9. An excellent post; yes, more please.

    Can someone clarify Grygera’s situation? I have not read anywhere else about him being released and he’s still listed on the club website as part of the squad.

    1. Yes, I wasn’t completely sure myself. We signed him on a one-year with an option (ours) to extend, which doesn’t seem to have happened, and his Wikipedia entry describes him as a free agent. I guess it’s possible that we might yet exercise our option, although I would have thought that it expired on 30 June.

  10. Missed it at the time, but can now see that more detail on income and how everything compares with other clubs can be found from David Conn at.

    http://www.guardian.co.uk/football/2012/may/23/premier-league-accounts-profit-debt

    Maybe Douglas could in due course pick up on some aspects of how we compare with others and on our various income streams, current and potential. I had a go at that five years ago, but it’s high time for another attempt and Douglas seems the man to do so. (Please).

  11. Just echoing thanks for the great article.

    On wages, I had always wondered what our players were paid. Your 40k average seems to make sense, but I wonder if anyone knows what the spread is: presumably, Danny (rip), Dempsey, Hangerland, Dembele at a top end. In any case, it puts the Pog’s demand for 65k in perspective!

    But if he can demand that much and get it at Reading, what hope for us to compete in the transfer market for anyone who is both established AND young(ish)?

    1. Yes, 65K – crumbs! I rather think that Reading have been moneyballed on those terms! They’ve given him a four-year deal as well, so the goals had better keep coming.

      It’s really tough to know what the players are getting. The best I’ve been able to do is the odd press report, but they’re best taken with a pinch of salt because I suspect they are often based on disclosures from agents, who have an interest in talking up the amounts paid.

  12. I’d like to echo the above plaudits. Nicely written and in language I can understand, a follow up would definitely be appreciated.

    It seems to me football finances involve a great deal of smoke and mirrors, is this consistent with other big businesses or is football somehow a “special case”?

    1. To be honest, I think that football club finances just don’t get enough scrutiny. There’s quite a bit of information around if you go looking for it. But sports journalists seem to know virtually nothing about finance, and perfectly willing to swallow whatever line is fed to them. The Rangers saga has provided a perfect example – the standard of reporting on it has been pitiful, from a business point of view.

      1. When rugby union went professional in the mid-nineties and Newcastle were the first “moneybags” club thanks to Sir John Hall’s backing, they signed Rob Andrew as player-manager for a “reported” £750,000 per annum (untold riches in rugby then).

        I later heard a long established rugby journalist admit that they had come up with the figure, and as Rob didn’t deny it, they ran with it.

  13. Thanks for all those positive comments. Glad people enjoyed the piece. There seems to enough interest in the subject to warrant more on it. I’ll try and do something at the end of the transfer window, once we know all the comings and goings.

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