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From: Leeds United Supporters Trust <chair...@lufctrust.org>
Date: 09/04/2014 18:27 (GMT+00:00)
To: John <j...@boocock.net>
Subject: Trust financial analysis of LUFC account 2013
Leeds United Supporters Trust Statement
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Trust financial analysis of LUFC account 2013
FINANCE UPDATE - 2013
Now that the latest accounts (to June 2013) have finally landed we have
undertaken a review and have the following summary for our members.
HEADLINES
- Turnover decreased by 8% from £31.1m to £28.6m (compared to 4% in 2011/12)
- Gate receipts decreased by 17% from £11.3m to £9.7m (compared to 12% in
2011/12) with average attendance down by 7.7% - perhaps reflecting lower ticket
prices as a factor
- Staff costs to turnover ratio increased from 57% to 70% (51% in 2010/11)
- Overall admin costs increased from £9.8m to £13.3m (£8.6m in 2010/11)
- “Unknown” admin costs increased from £5.2m to £6.2m (£4.5m in 2010/11)
- Directors received £794k compared to £347k in 2011/12, with one director
awarded a £440k bonus.
- Yorkshire Radio has had an impact of £1.5m on the loss in the year as LUFC
have been forced to write off all the amounts they were owed by them.
- Profits from net player trading of £2.0m helped reduce the overall loss from
£11.6m to £9.6m.
- The current debt stands at £24.7m compared to £14.6m on a like for like basis
1 year ago
- Money gained from the court case win against WYP (of £1m) was put towards
clearing payments of the preference shares – controlled by Ken Bates
These accounts show the situation at Leeds United as at the end of June 2013
which was before the widely reported further funding that has been injected
into the club by Cellino, so in all likelihood the debt has grown since.
Despite what has been claimed, GFH have actually invested nothing into Leeds
United but have instead loaded further debt onto the club and managed to record
the biggest annual loss since 2004 (the immediate post-Ridsdale era).
While Ken Bates and Shaun Harvey were in control for 50% of this period and
undoubtedly laid the foundations for the performance in areas such as the
decreased gate receipts, it is only during the second half of the year that we
see the debt escalating at a pace, which would suggest that this is when the
costs started to spiral. As we have stated in the past, it was always our view
that performance was going to be worse in 2012/13 (had the old regime remained
in place) than the season before it, but even we are shocked at just how
dramatically it has deteriorated.
Summary of Leeds United Football Club Limited Numbers
Excluding Player Trading
2013 2012 Variance Variance
£’000 £’000 £’000 %
Turnover 28,568 31,080 (2,512) (8%)
Cost of Sales (5,558) (5,582) (24) 0%
Admin Exps (33,304) (27,672) (5,632) 20%
Operating Profit/(Loss) (10,294) (2,174) (8,120) (374%)
Staff Costs 20,004 17,828 2,176 12%
Other Admin* 13,300 9,844 3,456 35%
*Includes:
Rent 1,893 1,861 32 2%
Depreciation 1,477 1,193 284 24%
Accountancy Fees 140 112 28 20%
Other Known 3,570 1,444 2,126 148%
Unknown 6,220 5,234 986 19%
Post Administration Figures for Leeds City Holdings (Excluding Player Trading)
2013
2012
2011
2010
2009
2008
£’000 £’000 £’000 £’000 £’000 £’000
Turnover 29,322 33,097 34,475 27,533 23,535 23,249
Cost of Sales (6,190) (6,559) (6,376) (5,883) (4.930) (4.166)
Admin Exps (33,760) (29,557) (26,486) (22,789)
(21,384) (18,217)
Operating Profit/(Loss) (10,628) (3,019) 1,613 (1,139) (2,779) 866
14 months
Turnover
Turnover has steadily declined since its peak under the Bates Regime back in
2011/12 season, as some fans decided to vote with their feet in order to
protest against the running of the club. This meant that we were always
expecting a fall this season as GFH were tasked with trying to repair the
relationship with the fans. Gate receipts fell 17% and account for £1.6m of the
£8.1m increase in losses during the season. Unsurprisingly merchandising fell
by a similar percentage (and added a further £875k to the deficit); the
remainder of the Turnover items (TV revenue, Central distribution and
Commercial activities) more or less netted out meaning that total decrease in
Turnover accounted for £2.5m of the overall increase in losses.
Wages to Turnover
While turnover decreased, the badly needed investment in the playing squad did
happen. However, the figures suggest that it was more of an investment in total
number of playing staff rather than an increase in quality. The overall squad
grew from 46 playing staff (including apprentices) to 58 during the year (a 26%
increase). Overall wages increased by 12% in comparison; there was some
reduction in other staff, but given that the largest part of the wage bill
relates to Playing staff and management (which also increased from 17 to 20
people), it seems safe to assume that the average amount paid to the playing
staff actually decreased.
While we have always called for an increase in the wages to turnover ratio, the
method under which this has been achieved during the year in question is not
really what we had in mind. With turnover down (by £2.5m) and the number of
playing and management staff increasing dramatically (at an additional cost of
£2.2m), the ratio went from 57% to 70%. It is highly unlikely that Leeds United
will have the lowest ratio in the division anymore but, while the quantity side
of this equation has been fulfilled, the quality of the additional spending
does not seem to have noticeably improved. We would not call for this ratio to
be exceeded next season (or beyond), in fact if anything it needs to decrease,
but we would definitely suggest to the new management that a reduction in
quantity and increase in quality needs to be the focus.
Costs of the Directors has increased dramatically which can largely be
explained by the increase in number of Directors, as well as the significant
bonus payment made to one of them (£440k).
Other Costs
It is this area where we have seen the most shocking situation. We have always
maintained that the ‘other’ costs at Leeds United were excessive, therefore to
see a £3.4m increase in these was deeply concerning. In terms of the increase,
we can see that £1.5m of this relates to a one-off cost associated with the
closure of Yorkshire Radio (where the debt owed to Leeds United by the radio
station had to be written off), a further £0.6m relates to increased admin
costs associated with player transfers and £0.3m relates to the legacy of Bates
building works. The remaining £1m of additional costs is unknown, taking what
was already a bewildering £5.2m figure up to £6.2m. Undoubtedly much of these
are likely to be legal costs associated with the takeover but it seems any hope
of light being shed on these unknown expenses under the regime of GFH has been
disappointingly shattered.
We still believe this is an area Massimo Cellino can find savings in and hope
that it will go some way to reducing future losses.
Cash
As we expected cash has been in short supply at Elland Road, and this became
even more apparent with the recent reports of a wages crisis at the club. Given
the huge increase in costs and the reduction in revenues this is no surprise,
but it is obviously a situation that cannot be sustained. Just how close we
came to another Administration event may never come to light but the accounts
reflect a situation where the club was living a hand to mouth existence for
some time and this situation would have had to come to a head but for the
introduction of a new cash injection.
Group Companies
The Group situation is perhaps the one area where it appears that GFH took the
painful decisions and acted correctly. Yorkshire Radio was closed down having
made further losses (which impacted the football operations) and some
consolidation appears to have occurred making the family a bit more manageable
in size. However, the eternal promise made by Ken Bates regarding non matchday
incomes has still yet to materialise as the combined efforts of the non
footballing side of things resulted in a turnover of £754k and costs of £1.09m
(an overall loss of £334k).
Debts
In six months GFH appear to have added a further £10m (net) to the debt left
behind by Ken Bates, much of which is in the form of short term loans. The list
below details the current situation regarding debts at the club.
Preference Share payment to Lutonville £0.1m
Ticketus 2 LLP Loan Repayment £2.3m
Compass £1.3m
Brendale £11.3m
Berrydale £2.0m
Director Bonus £0.2m
Sport Capital £1.8m
Working Capital Shortfall £5.7m
TOTAL DEBT £24.7m
If the contingent payment of £4.8m to the Administrators is included this
figure increases to £29.5m (assuming we get promoted by 2018).
Conclusion
If we thought when we parted company with Ken Bates that things could not get
any worse, that has quickly been dispelled by these numbers. This does not mean
that Ken was in anyway better for the club, nor is he absolved from blame in
our opinion. Many of the issues relate directly to the state of the club that
he handed over (falling revenues, disgruntled fans) and the long term decisions
he took (Yorkshire Radio and the building obsession), but what is clear is that
GFH did not seem equipped to manage these situations and had no obvious plan to
do it. They took over the club with no funding and have had to react to each
cash crisis as it arose by finding loans as and where they could. It seems
obvious why they needed so desperately to sell. However, perhaps the profitable
running of the club was never a real concern, as the GFH financial statements
appear to show that in spite of all this they have managed to make a profit out
of this sorry state of affairs. GFH reported that they made a US$6m profit out
of their holding in Leeds United by selling shares in the club (Leeds United
Holdings) to strategic investors. Like Leeds United, those investors seem not
to have been quite as fortunate as GFH in terms of profit as reports suggest
the club has been sold to Massimo Cellino at a value nearer to what they
originally paid.
As is always the case finances never tell the full story but, while GFH do not
appear to be able to run a profitable club, they do seem to be able to make a
profit out of a loss making enterprise.
-----------------
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John 'Grampa' Sykes
Rest In Peace old lad
28th Oct 1938 - 12 Nov 2013
MARCHING ON TOGETHER
