As QPR drop their financial accounts for the 2024/25 season under Marti Cifuentes showing big upticks in transfer spend and wages, we turn again to Simon Dorset who has been reviewing the club’s finances for LFW for the last decade to get his take on the numbers.
The following article analyses QPR’s latest set of accounts which cover the 2024/25 season when Marti Cifuentes’ team finished 15th in the Championship. You can download the full set of accounts for yourself at this link and Simon’s ten years of analysing these numbers for LFW are linked at the bottom
Having endured season after season of Queens Park Rangers battling to avoid breaching FFP by slashing their wage bill, selling players they’d rather have kept, gambling on replacing them with out of contract players with checkered injury records and finally waking up to sponsoring anything that couldn’t be sold, it has been unnerving for some to see a number of players signed for reportedly significant transfer fees.
The publication of the 24/25 accounts this week gives us the first real opportunity to see if those fears are well founded or not.
Historically, the club’s biggest cost has been payroll which comprises over half of the club’s total running cost. It is, however, its relationship with the club’s revenue which would give us the first red flag. The 2023/23 season was the first since the club stopped receiving parachute payments that the payroll dropped beneath 100% of the club’s revenue.
For clarification, the club’s revenue is defined as income derived from the club’s primary business activities which are those that take place on or around the pitch such as the sales of tickets, merchandise, sponsorship, advertising and broadcasting rights. Football clubs do not exist to sell players and so any profits from this are excluded. The total cost includes all the direct costs incurred by the club, but not finance costs such as loan repayments.
It was widely expected that the payroll would rise in these accounts, in part due to the reportedly backloaded deals offered to the likes of Steve Cook, Michi Frey, Jack Colback and Lucas Anderson to entice them here for 23/24 when the team was in serious relegation danger with no PSR headroom to do anything about it. And it has – wages rose 15% to £27.5m even though we employ the same number of staff (176) as we did the year before (132 footballers, managers, coaches and support staff; 44 commercial, marketing, retail, admin, maintenance people).
In any other industry you’d not read the following sentence, but the board are probably happy enough spending 98% of the club’s revenue on salaries. QPR will be languishing in the bottom half, possibly even bottom third, of the payroll to revenue table in the screwed-up world of the Championship. I don’t think that anything under 100% qualifies as a red flag, but definitely one to keep a close eye on as it’s heading in the wrong direction.
After the payroll, the next largest, but controllable, cost is that of buying new players or, to use the correct terminology, the cost of acquiring players’ registrations.
In accounting terms these are intangible assets as they offer a benefit to the club, but no physical form. The cost of these is accounted for evenly over the duration of the player’s contract, this is known as amortisation. While this gives a clear indication of the investment in players, it is even more revealing when viewed alongside the players’ Net Book Value. The NBV of any assets, such as a player’s registration, is the original cost of securing his registration less the accumulated amortisation.
Thanks to Christian Nourry’s unwelcome policy of not publicising the length of players’ contracts, we can only work on a rule of thumb and common sense here. However, the next red flag is the NBV rising disproportionately more than the amortisation. This would confirm the legitimate concern that long contracts have been awarded.
The table shows that the total external cost to QPR in acquiring players’ registrations in the 2024/25 season was just over £10m. This list of players includes Nicolas Madsen, Zan Celar, Jonathan Varane, Liam Morrison, Daniel Bennie and Esquerdinha. If these players were on two-year deals, we would expect the amortisation for them to be £5m. As the amortisation is less than half of that, it is fair to assume four-year deals. There are several flaws with that simplification, such as the players would have to be signed on June 1, 2024, to allow a full year’s amortisation and there was an existing net book value which would also result in amortisation, but neither of those actually improve the situation. It is also significant that the club has broken with a nine-year trend and not stated the average remaining amortisation period.
The result of this means that our amortisation will be at a minimum of £2.5m per season for the next three seasons. As the club reportedly had another large summer spend this year, and then followed up with Ronnie Edwards and Justin Obikwu in the January window, that amortisation could more than double in the 2025/26 accounts and the net book value climb back to levels unseen since our parachute payment days. Red flag? I should say so.
The following table has no direct bearing on the club’s profit and loss, and therefore its FFP calculation, as these are strictly cash flow figures, but the payments made and received for players’ registrations and all known future payments and receipts not only add to the overall picture of the club’s financial health but would indicate if the club is mortgaging its future.
From the intangible assets table, we know that the booked cost of acquiring players’ registrations was £10m, but we can see here that the club paid out less than £6.5m. That is because some of the registrations are being paid for in instalments, with payments of £1.998m due in the 2025/26 season and further payments of £1,860 due after that. This is partly offset by receipts due from the sales of players’ registrations also being staged. As a side note, any future contingent payments which have not been triggered will not been included, although the club can elect to include any which appear inevitable. Overall this is a sensible strategy which has presumably been repeated this summer so needs to be managed sensibly to avoid it becoming overwhelming.
The two main areas that Christian Nourry said that club was looking towards enable them to bring the annual loss down to the £10m to £12m range were commercial revenue and profit on player sales, so lets place a stake in the ground on these so we can track their progress.
The % increase shown is comparing the 2024/25 season to the 2022/23 which roughly coinciding with Nourry’s tenure at the club. He has notably driven an increase in sponsorship and advertising and has targeted increasing the club’s overall commercial income by a further £1m in the 2026/27 season. The improved Sky TV deal represented in broadcasting rights in the table is the other major factor in an increase in revenue of that period.
The profit from player sales figure will only include and contingent payments (add-ons) when they are realised, so the 2024/25 figure may not reflect all of the profit that the sales of Armstrong and Dykes will eventually generate, but may well include additional payments from Crystal Palace if for example Eze starting for England, Palace winning the FA Cup or qualifying for Europe triggered any.
When considering any club’s FFP position, the starting point should always be the season that is rolling out of their three-year reporting period.
For QPR, the 2021/22 season represented their biggest loss since being relegated from the Premier League with the exception of 2017/18 season during which the club incurred their FFP fine. Bearing that in mind and allowing for the increased TV revenue and cost of living allowance in the FFP calculation, it was highly unlikely that the club would be close to breaching FFP in the 2024/25 season but, what is of interest, is how they would position themselves for the next couple of seasons on the back of that; whether they’d maintain a safe margin or try to exploit the opportunity.
The smaller loss suffered in the 2024/25 season compared to the 2021/22 season, aided by the increase in Swiss Ramble’s disallowable costs (I’d suggest due to depreciation charged on the construction cost of the TSG Elite Training and Performance Centre) and the cost of living allowance replacing the final Covid-19 cost allowance, shows an increase of headroom to £6.6m.
Casting forwards, if this season was repeated in 2025/26, the club’s headroom would increase to more than £10m (as the cost of living allowance is rising to £3.5m per season) and casting forwards again, rolling out the smaller loss in 2023/24, it would settle at over £7m thereafter.
However, as so often, one of the more interesting pieces of information comes in the final page of the report. The penultimate note in the accounts is the ‘post reporting date events’ – i.e. stuff we’ve done this season – and it confirms that will not be the case.
This lists a number of players whose registrations have been acquired (Kwame Poku, Amadou Mbengue, Rumarn Burrell, Richard Kone, Koki Saito, Isaac Hayden, Karamoko Dembele, Kealey Adamson, Tylon Smith and Jaylan Pearman), the sale of Charlie Kelman’s registration to Charlton, a further list of players who have left due to the expiry of their contracts (Colback, Morgan Fox, Andersen and Kenneth Paal) and the much anticipated sell-on clause activated by Ebere Eze’s transfer to Arsenal. The note goes on to say that the impact of this player trading is a net outflow of £1.498m with contingent clauses which, if all are realised, would give a further outflow of £2.4m.
Due to the profit on the sale of player’s registrations being recognised immediately in full in the club’s accounts, but the cost of acquiring one being amortised across the length of the player’s contract, it is impossible to produce an accurate projection based on that high-level information, but let’s look at one scenario.
Assumptions:
QPR’s earning before tax remains consistent with the exceptions of:
Profit from player sales (Eze and Kelman) - £12m
Therefore, the acquisition cost of the summer purchases - £13.5m
All on 4-year contracts – annual amortisation £3.375m
Annual salary increase - £2.5m (bearing in mind that players have left too)
Ronnie Edwards – cost £4.5m – annual amortisation £1.125 – annual salary £1m
While these numbers will be woefully flawed, they can’t help but show that the daylight created by the club’s sterling work in the 2023/24 season is fading. With a few small tweaks I could have produced a table which showed more positive number, but the overall trend would still have been in the same direction. Either way, they do stress the necessity of regular player sales unless the club change their business model.
One final comment from the accounts which should be used to temper this is that the shareholders have signed deeds undertaking to continue providing financial support up until 31st May 2027 (don’t read anything into the date – it gets extended every year), to a maximum funding of £40.6m which was based on detailed cashflow forecasts from which any expected profits from player sales had been removed. From that, I can only conclude that they don’t see the situation to be quite as stark as I’ve presented and their spreadsheets will have far fewer assumptions in them.
Also by this author >>> And breathe – 23/24 accounts >>> Always crashing in the same car -22/23 accounts >>> Edge of the precipice – 21/22 accounts >>> Paying Dividends - 20/21 accounts >>> Grounds for Concern >>> Gordon Jago: Leading From The Front >>> The Trust >>> Accounting for success - 19/20 accounts >>> Gambling with FFP - 18/19 accounts >>> The greater evil >>> Terry Venables: My first hero >>> QPR’s fairytale of New York
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