LFC finances
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However, here’s the thing. Much of the revenue growth has been eaten up by higher costs. In fact. Since 2015 #LFC wages have grown 87% (£144m), i.e. at a faster rate than revenue 79% (£235m), the highest in the Big 6, due to recruiting better players and higher bonus payments.
One of the most important sections from the thread which explains we do not always see the real picture from outside.
One of the most important sections from the thread which explains we do not always see the real picture from outside.
I'm no accountant, but 235 is a bigger number than 144, so we actually have more money, and I'm no businessman but having more money compared to last year is better than having less money. Unless of course you are worried about the DCF valuation of the business, which means you need the % growth rates projected into the future to by going the right way, so that when you sell the club that is when you get the most money, money which goes into your pocket, looking out for number one.
I'm no accountant, and only speed read that lot, but, i'm guessing what we should be is borrow to invest in the squad if we want to have a strong chance of retaining the title. Sure, we were miles ahead of City last season, but the odds on them having a season like that again are slim, i'd say.
Basically the upshot is that other teams invest via debt or injections from their owners.
In the PL model there isn't really that much margin available for self-funding transfers, perhaps apart from Man Utd, who are on a different level. Things are so competitive that income gets eaten up by wages.
But the flipside is that the reason it's so competitive is that the capital growth is so vast. Our owners have made close to £2bn on us (yes, on paper, but still) in the 10 years they've owned us. The returns probably aren't so big for other owners but it's still clear that it's an exploding market which justifies continuing investment from owners looking for big gains.
So technically it's probably true that we're more or less spending what we can afford, but whether you can justify that stance from the owners when they're basically achieving extraordinary returns on the back of Klopp and one off bonanzas like the Coutinho sale is a different story.
Personally I doubt it's sustainable. We need to be spending more if we don't want to fall behind (and for the owners maintain the value of their asset).
What's clear is that it's nothing to do with spending more on wages. The proportional increase (small anyway) over turnover is probably due to bonus payments, and in any case it's a small enough difference that wages as a percentage of turnover has basically remained static.
There's also no hint of FFP problems. We've made a couple of 100m in profit the last few years, so if you add that to the spending allowances in FFP then it's clear we COULD spend way more via debt if the owners wanted to.
Yeah, I read (skimmed if I'm honest) and I still don't get it.
We are up on every metric possible and that is mostly down to on the field success. It's not sustainable to just expect that to continue with no investment.
I get the whole Covid uncertainty thing but life has to go on and at the moment it just feels like they've pressed the pause button and are hoping everyone else will do likewise. So far... not a great bet.
We are up on every metric possible and that is mostly down to on the field success. It's not sustainable to just expect that to continue with no investment.
I get the whole Covid uncertainty thing but life has to go on and at the moment it just feels like they've pressed the pause button and are hoping everyone else will do likewise. So far... not a great bet.
Basically yep. It's technically probably true that we're only spending what we can afford. But imo it's also clear you can't really compete in the PL without help from owners, and why the fuck shouldn't they help when they're making massive gains every year.
From the investment POV they're pretty crap owners. In terms of running things they look fantastic right now, but that basically coincides with getting Klopp in. I reckon that had more to do with our history etc than anything they offered. Before him they didn't look particularly competent. Not bad, but not great either.
Swiss Ramble basically goes the long way round to say that it's cash that matters, not revenue or profit. He misses out the spending on the training ground this year which would make the issue worse (the figures he mentions are for the last 3 years).
As @peterhague says, if you don't have the cash you can only invest if you raise funds by increasing debt or equity (which is what Chelsea will be doing, for example).
FSG / LFC has historically chosen not to raise extra debt or inject equity - obviously some will say that's their prerogative and others will think they should do so as it's the only way to continue to compete.
As @peterhague says, if you don't have the cash you can only invest if you raise funds by increasing debt or equity (which is what Chelsea will be doing, for example).
FSG / LFC has historically chosen not to raise extra debt or inject equity - obviously some will say that's their prerogative and others will think they should do so as it's the only way to continue to compete.
It's just accounting semantics to treat transfers as a mish-mash of operating and capital expenditure. Transfers is a type of business, just like match days, television, and merchandise. The important difference is the combined revenues of those traditional businesses returns £5m. The revenues from transfers returns £50m. Because of various reasons there is now far more volatility attached to the £50m business than the other £5m businesses, so we've decided not to participate in it. We're just afraid of what will happen if we lose. So whilst the other clubs are playing on the high stakes table, we're sticking to the safe and secure low stakes table. Guess how that ends? Some of the high rollers will lose, we can laugh at them, but half of them will win, and win big, that will wipe the smile off our faces very quickly.
That was one of the things I took from it. There is literally no budget for transfers anywhere.
Transfers aren't really a type of business, at least not if you want to compete.
It's a category of investment, like a factory buying machines.
The problem with the reported figures is they bear no relation to the actual real world cost, cos accounting rules say you have to amortise the fees even though they're appreciating assets.
So you get bullshit like profits on player sales of £50m in one year even though you bought the guy for 50m 5 years ago and sold him for the same 5 years later.
It's complete nonsense.
It's a category of investment, like a factory buying machines.
The problem with the reported figures is they bear no relation to the actual real world cost, cos accounting rules say you have to amortise the fees even though they're appreciating assets.
So you get bullshit like profits on player sales of £50m in one year even though you bought the guy for 50m 5 years ago and sold him for the same 5 years later.
It's complete nonsense.
It's both, just like property which generates rental income like a factory machine, as well as capital gains once you shift it to the next sucker. Plenty of people use leverage/debt to magnify those gains, which is what other clubs are doing. Sitting there and pointing at their debt as a bad thing and claiming some financial high ground for us having no debt is pretty ignorant. It's just about how much money you make at the end of the day, and they're going to make more than we are because we're pussies.
Imagine we borrowed £100m to buy Havertz, in five years time he'd be going for £200m at least, probably a lot more because we'd have been successful and he'd have been under a manager that improved him. We pay the £100m back less the virtually zero percent interest, and that's £100m of sweet juicy cash in the bank. What is the downside? Either we don't have faith in Klopp to deliver, or think football will die off due to the pandemic, or some other dreamed up risk, whatever it is we're now staring at the normal £5m cash in the bank from selling some shirts whilst haggling over two very ordinary left backs. It's a total mistake and mismanagement of the business, nevermind the football.
I agree with this, but I think the issue (for most clubs) comes down to accessing the finance. The teams that are borrowing money to buy players are often borrowing that money from their owners. That's partly because it's easy to do that, but also because banks will only lend so much to a football club. They will want some form of security to ensure they'll get paid if clubs default or go bust and most clubs don't really have much in the way of valuable assets that the can pledge as security.
Players? No, financial pledge over a player's registration will be third party ownership and that's not allowed under FIFA rules.
Stadium? If the club goes bust, it has little value, other than the underlying value of the land as there's no-one else likely to want a football stadium for their business.
Future revenues? Potentially, and a lot of clubs will do this, raising money either against future transfer receipts or their media income, but those loans tend to be fairly expensive, probably more so in the current environment.
So again, we're back to whether FSG will put their own money in, and the answer seems to be no.
That's probably because they're more diversified than we think - we only ever hear about Henry, Gordon and Werner, but there will be a lot of other passive investors in FSG (per Wikipedia, the Red Sox accounts list 19 partners plus a senator who is a senior advisor). Most of those guys will have relatively small amounts invested but they are probably high profile, wealthy individuals, so they need to be kept sweet. I imagine all of those guys like baseball, football not so much, so Henry, Gordon and Werner can only really get away with owning LFC so long as it doesn't place a financial burden on those minority investors. Which is why they won't lend, because if they can't get money from the banks they won't want to go cap in hand to those other investors for their share of the money, knowing that they don't really like footy anyway.
I found this... wonder if an alterative bidder will come in
Premier League rights: China deal terminated with immediate effect
Last updated on3 September 20203 September 2020.From the sectionPremier League
China was the Premier League's most lucrative overseas television rights territory
The Premier League has terminated its £564m contract with its Chinese licensee with immediate effect.
China was the English top flight's most lucrative overseas television rights territory, with a three-season deal agreed in 2019.
It is understood the reasons for the termination are financial rather than political.
BBC Sport has been told streaming service PPTV withheld its latest payment of £160m, due in March.
In a statement on Thursday, the Premier League said: "The Premier League confirms that it has today terminated its agreements for Premier League coverage in China with its licensee in that territory.
"The Premier League will not be commenting further on the matter at this stage."
PPTV is owned by Suning Holdings, the Chinese group which also has a controlling stake in Serie A side Inter Milan.
Analysis
BBC sports editor Dan Roan
At a time when the value of domestic TV rights for the Premier League has fallen, China has become a hugely important growth market for the top 20 English clubs.
The bumper PPTV deal represents a significant proportion of the £4bn due to be made between 2019 and 2022 from overseas TV rights, with several English clubs now also backed by Chinese investors and sponsors.
This contract termination seems something of a shock then, and, with the coronavirus pandemic already depriving clubs of hundreds of millions of pounds through lost ticket sales and commercial revenue, the collapse of this agreement is another major financial blow.
Sources insist this all stems from the Chinese broadcaster's failure to make a £160m payment in March - leading to a legal dispute with the Premier League. Despite offering to extend the deal under new terms, PPTV feels the product is no longer worth what they initially agreed to pay, amid the disruption of schedules and the prospect of half-empty grounds.
But could there also be political as well as financial reasons for the decision?
After all the news comes with relations between China and the UK strained over the government's decision to block telecoms giant Huawei from Britain's 5G network amid security concerns. Tensions intensified after the government offered residency to three million people from Hong Kong after China threatened a new security law.
Premier League rights: China deal terminated with immediate effect
Last updated on3 September 20203 September 2020.From the sectionPremier League
China was the Premier League's most lucrative overseas television rights territory
The Premier League has terminated its £564m contract with its Chinese licensee with immediate effect.
China was the English top flight's most lucrative overseas television rights territory, with a three-season deal agreed in 2019.
It is understood the reasons for the termination are financial rather than political.
BBC Sport has been told streaming service PPTV withheld its latest payment of £160m, due in March.
In a statement on Thursday, the Premier League said: "The Premier League confirms that it has today terminated its agreements for Premier League coverage in China with its licensee in that territory.
"The Premier League will not be commenting further on the matter at this stage."
PPTV is owned by Suning Holdings, the Chinese group which also has a controlling stake in Serie A side Inter Milan.
Analysis
BBC sports editor Dan Roan
At a time when the value of domestic TV rights for the Premier League has fallen, China has become a hugely important growth market for the top 20 English clubs.
The bumper PPTV deal represents a significant proportion of the £4bn due to be made between 2019 and 2022 from overseas TV rights, with several English clubs now also backed by Chinese investors and sponsors.
This contract termination seems something of a shock then, and, with the coronavirus pandemic already depriving clubs of hundreds of millions of pounds through lost ticket sales and commercial revenue, the collapse of this agreement is another major financial blow.
Sources insist this all stems from the Chinese broadcaster's failure to make a £160m payment in March - leading to a legal dispute with the Premier League. Despite offering to extend the deal under new terms, PPTV feels the product is no longer worth what they initially agreed to pay, amid the disruption of schedules and the prospect of half-empty grounds.
But could there also be political as well as financial reasons for the decision?
After all the news comes with relations between China and the UK strained over the government's decision to block telecoms giant Huawei from Britain's 5G network amid security concerns. Tensions intensified after the government offered residency to three million people from Hong Kong after China threatened a new security law.
Maybe we’re just waiting for a player global fire sale that we can capitalise on.
Maybe they’re convinced the investment in youth players will negate the need for large purchases.
What would be the impact of increasing debt to buy players?
Maybe they’re convinced the investment in youth players will negate the need for large purchases.
What would be the impact of increasing debt to buy players?
Imagine we borrow £100 mill then he breaks his leg and gets addicted to pain killers then moves onto meth. Then he’s worthless. We get none of the £100 million back.
Not if he suffers a fatal car accident, and we put in the insurance claim.
Whilst on meth?
What investment in youth players?
In terms of debt, we have very little so we'd be ok to take on more to fund transfers, but as Beamrider said it's more a case of how easy it'd be to access that. I'm not really sure tbh. But commercially we'd be fine.
The insurance company don't have to know about that fact, and if the truck which he smashed into was delivering supplies of phenylacetone and methylamine, the presence of heat from the explosion and we can explain away any adverse findings in his toxicology report.
I think you have rightly pointed out other things from the article/report. But I am not sure if FSG or club are really making any particular gains as such in total, as they are also simultaneously investing in other infrastructure at the club. There needs to be a well defined path where risks are lower compared to opportunities when you invest in a project (e.g. millions on Havertz or Werner). In the current scenario, FSG do not see any particular opportunity in terms of investing more in the current squad. They might be thinking "what is the use of academy or currently having WC players in their prime or buying young players with potential", if you have to keep investing 100s of millions every now and then. So for FSG, this is not the right time to invest and obviously some part of the decision making is being done from the likes of Moores or Hogans.
Nah. They're not stupid. They understand that sports teams need continual investment.
We have spent nothing pretty much since VVD and co came in. They've gotten the absolute maximum value out of their investment so far. The focus is now on the future and it feels like it's being neglected.
Klopp has often talked about leaving a solid foundation for his successor. I very much doubt he or Edwards intended that foundation to be predicated on the talents of Jones and Brewster - promising as they may be.
FSG should think about getting an investor, as Boston RedSox and the other MLB clubs have been hit hard by the pandemic
https://www.forbes.com/sites/mauryb...cial-losses-for-the-2020-season/#1bffe0497f6c
https://www.forbes.com/sites/mauryb...cial-losses-for-the-2020-season/#1bffe0497f6c
What do you mean “what investment in youth players”?
We’ve signed 20 odd youth players on top of the local lads under Klopp as well as significant investment in combined training facilities for first team and academy.
Wasn’t the mess Hicks & Gillette got us in to at least partly to do with increasing debt to fund stuff?
You’re right, of course, we could increase debt, but it doesn’t feel like the right thing to do at the moment - despite everyone else seemingly doing it.
I'm surprised there hasn't been an article examining FSGs finances. Here you have a parent Sports company bleeding money during the lock down as almost all facets of its business is shutdown but players and staff all still need paying.
It maybe that FSG would like to invest in the transfer market but cannot, its running on empties at this moment in time
It maybe that FSG would like to invest in the transfer market but cannot, its running on empties at this moment in time
Stadia won’t be open again this season. So yea, we’re not making a profit after winning the treble.
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