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3-Year Projection, FFP, & The Self-Sustainable Business Model

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  • 3-Year Projection, FFP, & The Self-Sustainable Business Model

    Chaps, as promised in another thread, here is the projected 3-year financial model (attached document) which should make a lot of people happy and set the record straight on a number of items. These figures (especially relating to broadcast revenues) come from a number of reputable sources including the club accounts itself, the football league, and the premier league.

    Comments
    In the last set of published accounts (season 16/17), I noted that QPR had taken advantage of section 408 of the Companies Act 2006, and chosen not to publish its full statement of profit and loss. Perhaps due to on-going FFP negotiations, or be it to serve as a competitive advantage from a negotiating standpoint (player transfers, wages etc), or something else entirely.

    EBITDA / Full Profit & Loss / & FFP
    In any case, I am therefore loathe to publish the full analysis, specifically player trading and non-cash items (player amortization, player trading profit/loss, financial loans, interest payments), which are needed for FFP calculations. However, note that we are inside of FFP rules, with our third-year (17/18) likely to post a loss of in the region of 10m, which is inside the 13m yearly maximum.
    Note: EBITDA - Earnings before interest, tax, depreciation and amortization is a primary indicator of financial health and business fundamentals.

    Player Amortization / Transfers (Relative to FFP)
    Note that Amortization will be significantly down on previous years (in 17/18), and in continuing years, as we are not buying assets any longer (transfer fees) which depreciate (amortize) over their duration at the club. It means we are less reliant on player sales (trading profit), to offset this negative on the P&L account – something which has served us well in the previous 2 years (15/16, and 16/17), but is not as significant going forward.

    Outlook
    The outlook in the “post-parachute era” looks positive, contrary to the doom and gloom that often goes hand in hand with such discussions. Whilst on track to post a circa 6.7m loss (i.e. nothing like the scaremongering figures rumoured amongst our fan base), we may at such point in time have a number of sellable assets (2 years from now), and a number of replacement assets on the academy production line, to create a fully sustainable business model.

    Or, alternatively, our owners may bankroll this amount and see it as an “on-going investment” in playing staff (i.e. covering some of their wages), in order to reach the promised land, and by virtue, get a whole load of their money back. Either way, it is manageable and we are rapidly returning to financial health, which in turn, may well be attracting outside investment. I’ll post more on this related topic, if there is interest at a later date.
    Attached Files
    Last edited by Jonny; 22-05-2018, 06:49 PM.

  • #2
    Thanks for your effort there mate, it'll make it all much clearer to others. Not me, financial stuff is all farking Japanese to me lol. But I read the word "positive" so I'm hopeful we aren't going bankrupt
    Top Scorers 2018/2019

    Ebere Eze - 1
    Luke Freeman - 1
    Pawel Wszolek- 1

    Summer Transfers 2018

    IN
    Toni Leistner, Angel Rangel.

    OUT
    Jamie Mackie, James Perch, Nedum Onuoha, Jay Emmanuel-Thomas, Jack Robinson, Alex Smithies, David Wheeler (loan).

    Comment


    • #3
      Thanks for this but is it just me who can`t open the attachment?

      Comment


      • #4
        We are doomed 19/20.

        Comment


        • #5
          Nice and succinct. Excellent analysis

          Comment


          • #6
            Originally posted by padam View Post
            Thanks for this but is it just me who can`t open the attachment?
            It's a Docx document, so you would need to open it with Microsoft Word or a similar compatiable program.
            Minds Are Like Parachutes.
            Work Best When Open...
            @Nowt2SeeHere

            Comment


            • #7
              Great post Jonny.
              I may have to have you look over my KPIBR
              Minds Are Like Parachutes.
              Work Best When Open...
              @Nowt2SeeHere

              Comment


              • #8
                Originally posted by Jonny View Post
                Chaps, as promised in another thread, here is the projected 3-year financial model (attached document) which should make a lot of people happy and set the record straight on a number of items. These figures (especially relating to broadcast revenues) come from a number of reputable sources including the club accounts itself, the football league, and the premier league.

                Comments
                In the last set of published accounts (season 16/17), I noted that QPR had taken advantage of section 408 of the Companies Act 2006, and chosen not to publish its full statement of profit and loss. Perhaps due to on-going FFP negotiations, or be it to serve as a competitive advantage from a negotiating standpoint (player transfers, wages etc), or something else entirely.

                EBITDA / Full Profit & Loss / & FFP
                In any case, I am therefore loathe to publish the full analysis, specifically player trading and non-cash items (player amortization, player trading profit/loss, financial loans, interest payments), which are needed for FFP calculations. However, note that we are inside of FFP rules, with our third-year (17/18) likely to post a loss of in the region of 10m, which is inside the 13m yearly maximum.
                Note: EBITDA - Earnings before interest, tax, depreciation and amortization is a primary indicator of financial health and business fundamentals.

                Player Amortization / Transfers (Relative to FFP)
                Note that Amortization will be significantly down on previous years (in 17/18), and in continuing years, as we are not buying assets any longer (transfer fees) which depreciate (amortize) over their duration at the club. It means we are less reliant on player sales (trading profit), to offset this negative on the P&L account – something which has served us well in the previous 2 years (15/16, and 16/17), but is not as significant going forward.

                Outlook
                The outlook in the “post-parachute era” looks positive, contrary to the doom and gloom that often goes hand in hand with such discussions. Whilst on track to post a circa 6.7m loss (i.e. nothing like the scaremongering figures rumoured amongst our fan base), we may at such point in time have a number of sellable assets (2 years from now), and a number of replacement assets on the academy production line, to create a fully sustainable business model.

                Or, alternatively, our owners may bankroll this amount and see it as an “on-going investment” in playing staff (i.e. covering some of their wages), in order to reach the promised land, and by virtue, get a whole load of their money back. Either way, it is manageable and we are rapidly returning to financial health, which in turn, may well be attracting outside investment. I’ll post more on this related topic, if there is interest at a later date.
                Thanks a lot, Jonny, much appreciated.

                However, you leave out the amortization part and the interest part (the costs below the EBITDA line). I though that was included in the FFP assessment. (meaning EBT used for FFP purposes, not EBITDA) Am I mistaken? The poor outlook I have projected has been based on the assumption FA/UEFA applies EBT not EBITDA in their FFP assessments, but I am very happy if I am mistaken, and your analysis would be the right one.

                Generally, our figures are pretty much exactly the same (TV revenue, player salary etc), other than the fact I have assumed player amortization and interest, both significant cost items, being part of the costs that count for FFP purposes.
                Last edited by QPROslo; 21-05-2018, 10:58 PM.

                Comment


                • #9
                  EBITDA is the defining metric for financial health, simply because it tells you if the business is making or losing money from its core operations. If this is not under control, everything else is a moot point.

                  You are correct that Player Amortization and Interest costs are part of FFP, but do not get hung up over it because;

                  a) Amortization is only relevant if you have continued, £multi-million transfers (“intangible assets”) that need depreciating (note: Amortization is significantly reducing and nothing like the 11m and 10m previous years figures thanks to our new frugal transfer policy)

                  b) given that we are actually MAKING money in 2 out of the 5 years, we don’t have to cover losses in those years, therefore reduced shareholder loans, and reduced “Interest” allocations on the P&L.

                  Summary: these P&L costs items are not significant (or not nearly as significant as they were), and therefore you (and the owners) can start to sleep well, no need to sell “shit loads of players” Oslo (winky face)

                  As Schteeve aptly said today “the club has stabilised, and now we can go forward”.

                  P.s. the interesting part in doing the analysis was the TV money. We still get a cool £9m from being in the Championship - including £5m (30% of the 3rd year prem parachute payment) in solidarity payment that only kicks in when the Premier League parachute payments end. So even when these come to an end we still receive a nice income stream - something that often gets overlooked.

                  Lastly, thanks for the comments guys, took a while to pull it all together on and off over recent weeks but worth it all the same. I’m really looking forward to the next few years as I really believe we have built some solid foundations and are now doing things the right way.
                  Last edited by Jonny; 22-05-2018, 12:14 AM.

                  Comment


                  • #10
                    Am I right in thinking that if teams bounce straight back, we get their parachute payments as well? As in the whole football league. So if all 3 teams go straight back up then the money they would have got for the 3 years, gets split towards the football league? Not sure ow much that would add up to but would have thought it would be a couple of million each?

                    Comment

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