Financial Fair Play / Profit & Sustainability

[timeEd32]

This post is obnoxiously long and it has so many guesses and disclaimers that I didn’t really want to post it, but we’re losing our collective minds in the transfer thread so here’s my attempt at backing in to where we stand financially. I said awhile back I think selling more players will be a priority right now and here’s the longer version of why I think that…

 

The last three years

We needed to make a profit of somewhere between £2m and £15m in 2023/24 to be PSR compliant for the three year cycle that just ended. £2m was Swiss Ramble's estimate based on allowable deductions, but it's all a bit of a guess since those deductions aren't published.

 

Here are the three years of that cycle:

2021/22 - £73m actual loss / £61m after allowable PSR deductions

2022/23 - £73m loss / £60m PSR loss

2023/24 - £2m(ish) PSR profit target

 

Our 2022/23 accounts break down as follows (this isn't everything - just the headline figures):

 

Revenue: £250m

Player sales profit: £3m

Wages: £187m

Amortisation: £87m

Other costs: £40m

 

Here are 2023/24 estimates from Swiss Ramble back in June. At the time he said we needed to generate about £44m in sales in the last couple weeks, I said he was wrong by up to £30m, and he was clearly not wrong so I am done questioning him.

 

Revenue: £300m

Player sales profit: £85m

Wages: £201m

Amortisation: £106m

Other costs: £46m

 

So, based on his estimates, we would have only needed about £15m of the Anderson sale to meet the requirements. If we accept that as true then we needed £65m of player sale profits to turn a £2m profit. It would also mean we added about £20m of additional headroom for this season (or next).

 

The £60m+ loss from 2021/22 now drops out, so that means we can go back to losing around £60-70m in each of the next two seasons if we’re willing to push it to the limit again (which I’d say is definitely not certain given how tenuously that ended). This sounds great on the surface, but the June PSR scramble has made me concerned about our costs.

 

This season and this window

Now let's look at 2024/25. If you want to read a bunch of waffle about how I landed on these numbers it's in the spoiler. For the most part I have not changed them just to get a sense of where we are today.

Spoiler

The loss of CL money (including the match day boost) is roughly offset by the addition of Adidas. I’m assuming there will be some events at SJP to replace things like Fender, Saudi, and England friendlies we’ve seen in the last couple years and I’m calling the Japan tour equal to the US one. The Amazon doc goes away, but let’s call that a wash from smaller deals we've done in 2024 that will now have a full 12 months as well as SELA Stack. A lot of words to say keeping revenue flat for now. There are clearly some new deals coming but just picking a baseline.

 

Wages are the trickiest part. The big downside to cashing in on Minteh and Anderson is it barely changed our costs. Dummett and Ritchie going will have done more for decreasing wages. I think Dummett + Ritchie + Anderson = Kelly, though it’s hard to fully trust what’s out there. Vlachodimos for Dubravka is also basically even (I’m assuming we’ll give him away at some point). Joelinton got an increase and Bruno now has a full year of his new contract. There are likely other increases, but also a drop from no European bonus. We’ll decrease by £5m, but that may be a kind guess.

 

Minteh removes £1m in amortization but that’s likely offset (or exceeded) by Kelly’s sign on bonus. Vlachodimos adds ~£3m, though that is probably offset by Joelinton’s extension. Hall is already included since his loan fee was essentially just another year of amortization.

 

I’m not including Isak or Gordon contract extensions, which will increase wages and decrease amortization.

 

I’ve decreased ‘other costs’ slightly since these are typically higher when in Europe.

 

Revenue: £300m

Player sales profit: £5m*

Wages: £196m

Amortisation: £106m

Other costs: £42m

* This is Ashworth. It’s not clear to me if this happened by June 30 or was done on July 1, but it doesn’t really matter right now as it helps regardless in the current period. It’s also not clear what the fee was so I’m hedging a bit.

 

So that’s £305m of money in and £344m out. In 2022/23 we also had about £10m in interest payments and depreciation. Swiss Ramble estimated essentially the same for 2023/24, so carrying that forward again. That means our starting point for this financial year is around a £52m loss.

 

If the Anderson sale gave us an extra £20m cushion then we can lose around £80m this season if we go to the limit. If we just barely made the £2m profit we needed then we can max out around a £60m loss. That’s an £8-£28m cushion from where we are now. For context, Tonali added about £18m in annual costs.

 

These numbers aren’t meant to be exact and are a starting point for this season, but hopefully illustrative of why it’s unfortunately not as pretty a picture as “well now we can lose £60-70m again.”

 

We need to get revenue up but there almost certainly isn’t £50m+ of revenue gains coming this season, so we also really need to get costs under control.

 

If we are able to sell Trippier and Almiron that would remove ~£15m from our costs this season, plus whatever fees they bring in. Add a training shirt sponsor and whatever else to boost revenue and then we’re creating some breathing room.

 

Even without Europe, UEFA’s rules are relevant to this window

One other factor in my mind is UEFA’s requirements, which include two parts most relevant to us – Stability (similar to PSR) and Cost Control.

 

For Stability, it’s much of the same calculations as above except the max limit will be €90m (roughly £76m) over the preceding three years, though it could be less based on a dizzying number of factors. If we’re planning for this it could mean that our target for 2024/25 needs to be a ~£30-40m loss at most.

 

For Cost Control, we had to have been under 90% wages & amortization for calendar year 2023, but we were likely between 85-90%. If we qualify for Europe this season then we’ll need to be under 70% for 2025/26, which is the first year of the fully phased in regulations. And the important note there is UEFA works on calendar years, so beginning January 1 our costs matter for next season (if we qualify, of course).

 

If we use 80% of the published wages to estimate 1st team/coaching wages (this is essentially what Swiss Ramble does) and use £30m as our player sales profit (average of 3 years, which we can increase with more sales this summer and next) then we are currently at 79.6%.

 

To get under 70% we need a net gain of about £45m (increased revenue and/or decreased costs). We may be ok drifting a bit above this number since there’s a fairly small monetary fine if you’re within 10% and a first time offender, but presumably it’s part of our planning.

[JonBez comesock]

You lost me at 

 

This..

[janpawel]

25 minutes ago, timeEd32 said:

This post is obnoxiously long and it has so many guesses and disclaimers that I didn’t really want to post it, but we’re losing our collective minds in the transfer thread so here’s my attempt at backing in to where we stand financially. I said awhile back I think selling more players will be a priority right now and here’s the longer version of why I think that…

 

The last three years

We needed to make a profit of somewhere between £2m and £15m in 2023/24 to be PSR compliant for the three year cycle that just ended. £2m was Swiss Ramble's estimate based on allowable deductions, but it's all a bit of a guess since those deductions aren't published.

 

Here are the three years of that cycle:

2021/22 - £73m actual loss / £61m after allowable PSR deductions

2022/23 - £73m loss / £60m PSR loss

2023/24 - £2m(ish) PSR profit target

 

Our 2022/23 accounts break down as follows (this isn't everything - just the headline figures):

 

Revenue: £250m

Player sales profit: £3m

Wages: £187m

Amortisation: £87m

Other costs: £40m

 

Here are 2023/24 estimates from Swiss Ramble back in June. At the time he said we needed to generate about £44m in sales in the last couple weeks, I said he was wrong by up to £30m, and he was clearly not wrong so I am done questioning him.

 

Revenue: £300m

Player sales profit: £85m

Wages: £201m

Amortisation: £106m

Other costs: £46m

 

So, based on his estimates, we would have only needed about £15m of the Anderson sale to meet the requirements. If we accept that as true then we needed £65m of player sale profits to turn a £2m profit. It would also mean we added about £20m of additional headroom for this season (or next).

 

The £60m+ loss from 2021/22 now drops out, so that means we can go back to losing around £60-70m in each of the next two seasons if we’re willing to push it to the limit again (which I’d say is definitely not certain given how tenuously that ended). This sounds great on the surface, but the June PSR scramble has made me concerned about our costs.

 

This season and this window

Now let's look at 2024/25. If you want to read a bunch of waffle about how I landed on these numbers it's in the spoiler. For the most part I have not changed them just to get a sense of where we are today.

  Reveal hidden contents

The loss of CL money (including the match day boost) is roughly offset by the addition of Adidas. I’m assuming there will be some events at SJP to replace things like Fender, Saudi, and England friendlies we’ve seen in the last couple years and I’m calling the Japan tour equal to the US one. The Amazon doc goes away, but let’s call that a wash from smaller deals we've done in 2024 that will now have a full 12 months as well as SELA Stack. A lot of words to say keeping revenue flat for now. There are clearly some new deals coming but just picking a baseline.

 

Wages are the trickiest part. The big downside to cashing in on Minteh and Anderson is it barely changed our costs. Dummett and Ritchie going will have done more for decreasing wages. I think Dummett + Ritchie + Anderson = Kelly, though it’s hard to fully trust what’s out there. Vlachodimos for Dubravka is also basically even (I’m assuming we’ll give him away at some point). Joelinton got an increase and Bruno now has a full year of his new contract. There are likely other increases, but also a drop from no European bonus. We’ll decrease by £5m, but that may be a kind guess.

 

Minteh removes £1m in amortization but that’s likely offset (or exceeded) by Kelly’s sign on bonus. Vlachodimos adds ~£3m, though that is probably offset by Joelinton’s extension. Hall is already included since his loan fee was essentially just another year of amortization.

 

I’m not including Isak or Gordon contract extensions, which will increase wages and decrease amortization.

 

I’ve decreased ‘other costs’ slightly since these are typically higher when in Europe.

 

Revenue: £300m

Player sales profit: £5m*

Wages: £196m

Amortisation: £106m

Other costs: £42m

* This is Ashworth. It’s not clear to me if this happened by June 30 or was done on July 1, but it doesn’t really matter right now as it helps regardless in the current period. It’s also not clear what the fee was so I’m hedging a bit.

 

So that’s £305m of money in and £344m out. In 2022/23 we also had about £10m in interest payments and depreciation. Swiss Ramble estimated essentially the same for 2023/24, so carrying that forward again. That means our starting point for this financial year is around a £52m loss.

 

If the Anderson sale gave us an extra £20m cushion then we can lose around £80m this season if we go to the limit. If we just barely made the £2m profit we needed then we can max out around a £60m loss. That’s an £8-£28m cushion from where we are now. For context, Tonali added about £18m in annual costs.

 

These numbers aren’t meant to be exact and are a starting point for this season, but hopefully illustrative of why it’s unfortunately not as pretty a picture as “well now we can lose £60-70m again.”

 

We need to get revenue up but there almost certainly isn’t £50m+ of revenue gains coming this season, so we also really need to get costs under control.

 

If we are able to sell Trippier and Almiron that would remove ~£15m from our costs this season, plus whatever fees they bring in. Add a training shirt sponsor and whatever else to boost revenue and then we’re creating some breathing room.

 

Even without Europe, UEFA’s rules are relevant to this window

One other factor in my mind is UEFA’s requirements, which include two parts most relevant to us – Stability (similar to PSR) and Cost Control.

 

For Stability, it’s much of the same calculations as above except the max limit will be €90m (roughly £76m) over the preceding three years, though it could be less based on a dizzying number of factors. If we’re planning for this it could mean that our target for 2024/25 needs to be a ~£30-40m loss at most.

 

For Cost Control, we had to have been under 90% wages & amortization for calendar year 2023, but we were likely between 85-90%. If we qualify for Europe this season then we’ll need to be under 70% for 2025/26, which is the first year of the fully phased in regulations. And the important note there is UEFA works on calendar years, so beginning January 1 our costs matter for next season (if we qualify, of course).

 

If we use 80% of the published wages to estimate 1st team/coaching wages (this is essentially what Swiss Ramble does) and use £30m as our player sales profit (average of 3 years, which we can increase with more sales this summer and next) then we are currently at 79.6%.

 

To get under 70% we need a net gain of about £45m (increased revenue and/or decreased costs). We may be ok drifting a bit above this number since there’s a fairly small monetary fine if you’re within 10% and a first time offender, but presumably it’s part of our planning.

Good post, shows how expensive wages are for established players (Tonali) 

[Unbelievable]

46 minutes ago, timeEd32 said:

This post is obnoxiously long and it has so many guesses and disclaimers that I didn’t really want to post it, but we’re losing our collective minds in the transfer thread so here’s my attempt at backing in to where we stand financially. I said awhile back I think selling more players will be a priority right now and here’s the longer version of why I think that…

 

The last three years

We needed to make a profit of somewhere between £2m and £15m in 2023/24 to be PSR compliant for the three year cycle that just ended. £2m was Swiss Ramble's estimate based on allowable deductions, but it's all a bit of a guess since those deductions aren't published.

 

Here are the three years of that cycle:

2021/22 - £73m actual loss / £61m after allowable PSR deductions

2022/23 - £73m loss / £60m PSR loss

2023/24 - £2m(ish) PSR profit target

 

Our 2022/23 accounts break down as follows (this isn't everything - just the headline figures):

 

Revenue: £250m

Player sales profit: £3m

Wages: £187m

Amortisation: £87m

Other costs: £40m

 

Here are 2023/24 estimates from Swiss Ramble back in June. At the time he said we needed to generate about £44m in sales in the last couple weeks, I said he was wrong by up to £30m, and he was clearly not wrong so I am done questioning him.

 

Revenue: £300m

Player sales profit: £85m

Wages: £201m

Amortisation: £106m

Other costs: £46m

 

So, based on his estimates, we would have only needed about £15m of the Anderson sale to meet the requirements. If we accept that as true then we needed £65m of player sale profits to turn a £2m profit. It would also mean we added about £20m of additional headroom for this season (or next).

 

The £60m+ loss from 2021/22 now drops out, so that means we can go back to losing around £60-70m in each of the next two seasons if we’re willing to push it to the limit again (which I’d say is definitely not certain given how tenuously that ended). This sounds great on the surface, but the June PSR scramble has made me concerned about our costs.

 

This season and this window

Now let's look at 2024/25. If you want to read a bunch of waffle about how I landed on these numbers it's in the spoiler. For the most part I have not changed them just to get a sense of where we are today.

  Reveal hidden contents

The loss of CL money (including the match day boost) is roughly offset by the addition of Adidas. I’m assuming there will be some events at SJP to replace things like Fender, Saudi, and England friendlies we’ve seen in the last couple years and I’m calling the Japan tour equal to the US one. The Amazon doc goes away, but let’s call that a wash from smaller deals we've done in 2024 that will now have a full 12 months as well as SELA Stack. A lot of words to say keeping revenue flat for now. There are clearly some new deals coming but just picking a baseline.

 

Wages are the trickiest part. The big downside to cashing in on Minteh and Anderson is it barely changed our costs. Dummett and Ritchie going will have done more for decreasing wages. I think Dummett + Ritchie + Anderson = Kelly, though it’s hard to fully trust what’s out there. Vlachodimos for Dubravka is also basically even (I’m assuming we’ll give him away at some point). Joelinton got an increase and Bruno now has a full year of his new contract. There are likely other increases, but also a drop from no European bonus. We’ll decrease by £5m, but that may be a kind guess.

 

Minteh removes £1m in amortization but that’s likely offset (or exceeded) by Kelly’s sign on bonus. Vlachodimos adds ~£3m, though that is probably offset by Joelinton’s extension. Hall is already included since his loan fee was essentially just another year of amortization.

 

I’m not including Isak or Gordon contract extensions, which will increase wages and decrease amortization.

 

I’ve decreased ‘other costs’ slightly since these are typically higher when in Europe.

 

Revenue: £300m

Player sales profit: £5m*

Wages: £196m

Amortisation: £106m

Other costs: £42m

* This is Ashworth. It’s not clear to me if this happened by June 30 or was done on July 1, but it doesn’t really matter right now as it helps regardless in the current period. It’s also not clear what the fee was so I’m hedging a bit.

 

So that’s £305m of money in and £344m out. In 2022/23 we also had about £10m in interest payments and depreciation. Swiss Ramble estimated essentially the same for 2023/24, so carrying that forward again. That means our starting point for this financial year is around a £52m loss.

 

If the Anderson sale gave us an extra £20m cushion then we can lose around £80m this season if we go to the limit. If we just barely made the £2m profit we needed then we can max out around a £60m loss. That’s an £8-£28m cushion from where we are now. For context, Tonali added about £18m in annual costs.

 

These numbers aren’t meant to be exact and are a starting point for this season, but hopefully illustrative of why it’s unfortunately not as pretty a picture as “well now we can lose £60-70m again.”

 

We need to get revenue up but there almost certainly isn’t £50m+ of revenue gains coming this season, so we also really need to get costs under control.

 

If we are able to sell Trippier and Almiron that would remove ~£15m from our costs this season, plus whatever fees they bring in. Add a training shirt sponsor and whatever else to boost revenue and then we’re creating some breathing room.

 

Even without Europe, UEFA’s rules are relevant to this window

One other factor in my mind is UEFA’s requirements, which include two parts most relevant to us – Stability (similar to PSR) and Cost Control.

 

For Stability, it’s much of the same calculations as above except the max limit will be €90m (roughly £76m) over the preceding three years, though it could be less based on a dizzying number of factors. If we’re planning for this it could mean that our target for 2024/25 needs to be a ~£30-40m loss at most.

 

For Cost Control, we had to have been under 90% wages & amortization for calendar year 2023, but we were likely between 85-90%. If we qualify for Europe this season then we’ll need to be under 70% for 2025/26, which is the first year of the fully phased in regulations. And the important note there is UEFA works on calendar years, so beginning January 1 our costs matter for next season (if we qualify, of course).

 

If we use 80% of the published wages to estimate 1st team/coaching wages (this is essentially what Swiss Ramble does) and use £30m as our player sales profit (average of 3 years, which we can increase with more sales this summer and next) then we are currently at 79.6%.

 

To get under 70% we need a net gain of about £45m (increased revenue and/or decreased costs). We may be ok drifting a bit above this number since there’s a fairly small monetary fine if you’re within 10% and a first time offender, but presumably it’s part of our planning.

 

Fantastic post timeEd32 and essential reading for all those who think we can easily drop 100-200m this window on two or three star players.

[DahnSahf]

At the most fundamental level what that post tells us is that, despite all the money involved, the sport is worthless.

[Terrymac1966]

What a sad sad indictment of football today. All this invented sh+t to keep the same teams at the top...

 

How the hell Villa are spending left right and centre was beyond me...then I remembered Diaby.....we are slowly being tied up in contrived knots of convenience to strangle our ambition and keep the status quo unthreatened. Pass the gun please....

[Ben]

Without knowing much, why the fuck are the Saudis not finding a way to pump money into the club ? 

[BoSelecta]

3 hours ago, Ben said:

Without knowing much, why the fuck are the Saudis not finding a way to pump money into the club ? 

A million mag+ memberships would do for a start. 

[brummie]

4 hours ago, Terrymac1966 said:

What a sad sad indictment of football today. All this invented sh+t to keep the same teams at the top...

 

How the hell Villa are spending left right and centre was beyond me...then I remembered Diaby.....we are slowly being tied up in contrived knots of convenience to strangle our ambition and keep the status quo unthreatened. Pass the gun please....

 

See my post in that Other Clubs' Transfers thread.

 

You really need to start generating home grown players for profit, that is where you get options.

[JonBez comesock]

We heard it from the horses mouth

 

it’s going to be a difficult summer!

 

Not sure why people think any different 

 

I can see us signing 2 players 

 

Maybe Miggy Leaves ?