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Annual accounts show that the club will have to sell players if we don't go up
Friday, 12th Apr 2024 17:43 by Tim Whelan

The club released the annual accounts for the 2022/3 season this week, and despite the headline figure of an overall loss of £33.7 million, we’re not in danger of any points deduction for now. But the accumulated losses mean that player sales will be inevitable in the summer if we remain in the Championship.

First, a bit of good news. Leeds had the eighth highest commercial income in the Premier League, thanks to Elland Road being sold out for virtually every league game (gate receipts going up from £24m to £29 m), along with a high level of retail sales to our nationwide and international fanbase. TV income was slightly down due to our drop from 17th to 19th place (as 25% of the Premier League’s payout is based on ‘merit’) but the turnover still reached a record £189.6m.

The bad news is that the annual wage bill jumped from £121 million to £145 million, and we also had to pay £9.5 million ‘compensation’ for severing the contracts of two head coaches. Thankfully this doesn’t include big Sam, who only ever had a deal for those desperate final four games of the season. ‘Administrative costs’ came to £275 million in total.

All of which meant that the operating loss increased to £105 million, but thankfully we could offset this with the sales of Phillips and Raphinha, so the overall loss was a rather more manageable £33.7 million. If you’re wondering about all the dross we bought with the proceeds of those two sales, this figure will only include the ‘amortisation’ for the first year, i.e. the transfer fee divided by the number of years covered by the player’s contract.

Some fans on social media have been asking whether these figures have taken account of the Augustin debacle, or whether those costs are yet to come back and bite us. Thankfully they won’t, because that has already been taken care of in the accounts for 2020-21. These initially showed a profit of £25m, but this was adjusted to a loss of £15m to take account of the settlements with RB Leipzig and with the player.

In 2021-22, the overall loss was £36m, so the total loss for June 2020 to June 2023 was around £87m, within the maximum losses of £105m which the Premier League rules allow over a three year period. Phew! But the next problem was to ensure that we didn’t breach the rules at the end of the current season. In the Championship the permitted loss is only £13m per season, so for the three years from 2021-4 our maximum allowable loss will be £83million.

With the combined loss approaching £70m in the last two year’s accounts, this meant that we can only lose just over £13m in the current season. This is why those relegation clauses in the player’s contracts were absolutely crucial, so we could trim the wage bill for all the players who went out on loan, as it would otherwise have been unmanageable. The monthly wage bill is now half the previous figure of £12m, with the wages of the players that remain going down by up to 60%.

It wasn’t an option to sell most of the departing players, as we had to match their book value (transfer fee paid less the first year’s ‘amortisation) to avoid having to show a loss, which would have been difficult when their actual value in the transfer market dropped during the relegation season.

That is why Tyler Adams was the only player to be sold in August, as the £20m from Bournemouth was the only offer to meet the necessary asking price for a player. This season we have the parachute payment, but that only comes to about 25% of our previous Premier League TV income, so we are still having to work hard to ensure our loss for this season remains within the limit. That’s why we keep getting all those emails begging us to order stuff from the club shop.

The sale of Sinisterra to Bournemouth was brought forward so it fell within this accounting year, even though the £20m raised was less than that specified in the option to convert his loan to a permanent transfer at the end of the season. We raised a few bob more with the sales of Poveda and Hejde, but we still didn’t have much cash to splash in the January transfer window.

So where do we go from here? Plan A is obviously that we get promoted next month and get back to the land of the huge Premier League TV income. But it’s perfectly clear that if we don’t then a reduced parachute payment next season will mean that we will have to sell a few key players to make ends meet.

There will be more scope for selling some of the players on loan, as their book values will have reduced by another year’s ‘amortisation’, and a few of the old stagers will drop off the wage bill altogether as their contracts expire. But this won’t be enough and it’s clear that we won’t get by without cashing in on the likes of Summerville and Rutter. Could we do this and still mount another promotion challenge in 2024/5?

All of which makes the final four games of this season (and a possible play-off tournament) even more crucial than we thought they were already. We might have to watch from behind the sofa.

Photo: Action Images

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