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Financial outlook for next season

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  • Financial outlook for next season

    I see from various message boards that many QPR fans refer to the need of selling players during the coming summer. I get the feeling many fans think we must operate a tight budget next season. It is actually very far from the truth. This season is financially very demanding, because of the overspend in 21/22 and 22/23, the first two years of the present running three-year period that FFP limits are measured against. However, next season will give us a lot of financial freedom.

    This season will give a loss from a FFP point of view of 4m to 6m. This is simple maths, based on the losses in the previous two seasons and the three-year FFP threshold of 39m. I think owners are now more focused on even annual spending, to avoid the previous overspend that has led to drastic cost cutting this season. The manic-depressive financial strategy of QPR, with big heights and low valleys, is something the board doesn’t want to replicate. However, I think the board will continue to be ambitious, and spend upwards towards the FFP limit, to maximise chance of promotion. Hence, I think we can assume that the club is willing to lose 13m per year (a third of the combined 39m three-year limit) if this is what it takes to reach the promised land.

    Hence, if revenue is the same next season as this season, we can spend 7-9m more next season and still do fine.

    But revenues won’t be the same. EFL has signed a new media deal that lifts media revenues by 40%. QPRs broadcasting revenues were 8.8m in 22/23, and if this is used as a starting point, media rights revenues will be ca 3.5m higher next season, if I have understood this correctly.

    If we add the two amounts together, we can spend 10.5m to 12.5m more next season than this season.

    But it does not stop there. Premier League and EFL are negotiating a new deal, where a higher percentage of the Premier Leagues broadcasting rights will be shared with the EFL clubs, after Premier League and Sky entered the new deal. Premier League has offered 21%, but EFL wants 25% (depending on which media reports one trusts most - I have used figures from the guardian). If we are careful, and apply the low end of the scale, and assume a deal is struck prior to next season, QPR could receive 3,75m extra next season, if the media figures of ca 75m extra for the Championship clubs combined are correct. Championship clubs want 5m extra each.

    Assuming there will be a deal and applying the lowest amount, we will have 14m to 16m more to spend next season.

    This means the following: If we don’t sell or let a single players leave (unrealistic of course – some will of certainly leave) and all other costs and revenues are the same as this season, we can sign up to 8 new players for 5m each this coming summer if we give all of them a four-year contracts with total salary costs of 15k per week per player. This will cost 10m in annual amortisation (40m divided by four) and 6m in salaries, a total of 16m per season.

    The example shows that we are in a very good financial situation next season. Even if Premier League and EFL won’t strike a new deal, we will be doing fine from a financial point of view. We can’t sign new players for 40m, but “just” 30m, if the contract length is four years on average.

    I have not even started considering the possible sale of Eze. If we are due 20% or 25% of the entire sales amount, it would create further significant financial headroom.

    The club might want to spend the money differently than in my example, but the point is that the grim financial situation this season is very temporary, if the owners are ambitious and want to maximise the chance of promotion, while still staying inside the FFP boundaries.

  • #2
    When you look at the likes of Andersen then you have to wonder what's the point of spending money on transfer fees. If there's a 22yr old out there with 100 appearances in L1 then yes. But if there's limited chances of resale then it's free transfers all the way to make the budget go further.

    I still think Chair will go for 5m which alone will give us 32k a week over three seasons. That will fund two players alone.

    Fingers crossed on Eze and our 20% should get us 10m. With the Chair money that's six players fully funded over three seasons.

    Comment


    • #3
      Originally posted by QPROslo View Post
      I see from various message boards that many QPR fans refer to the need of selling players during the coming summer. I get the feeling many fans think we must operate a tight budget next season. It is actually very far from the truth. This season is financially very demanding, because of the overspend in 21/22 and 22/23, the first two years of the present running three-year period that FFP limits are measured against. However, next season will give us a lot of financial freedom.

      This season will give a loss from a FFP point of view of 4m to 6m. This is simple maths, based on the losses in the previous two seasons and the three-year FFP threshold of 39m. I think owners are now more focused on even annual spending, to avoid the previous overspend that has led to drastic cost cutting this season. The manic-depressive financial strategy of QPR, with big heights and low valleys, is something the board doesn’t want to replicate. However, I think the board will continue to be ambitious, and spend upwards towards the FFP limit, to maximise chance of promotion. Hence, I think we can assume that the club is willing to lose 13m per year (a third of the combined 39m three-year limit) if this is what it takes to reach the promised land.

      Hence, if revenue is the same next season as this season, we can spend 7-9m more next season and still do fine.

      But revenues won’t be the same. EFL has signed a new media deal that lifts media revenues by 40%. QPRs broadcasting revenues were 8.8m in 22/23, and if this is used as a starting point, media rights revenues will be ca 3.5m higher next season, if I have understood this correctly.

      If we add the two amounts together, we can spend 10.5m to 12.5m more next season than this season.

      But it does not stop there. Premier League and EFL are negotiating a new deal, where a higher percentage of the Premier Leagues broadcasting rights will be shared with the EFL clubs, after Premier League and Sky entered the new deal. Premier League has offered 21%, but EFL wants 25% (depending on which media reports one trusts most - I have used figures from the guardian). If we are careful, and apply the low end of the scale, and assume a deal is struck prior to next season, QPR could receive 3,75m extra next season, if the media figures of ca 75m extra for the Championship clubs combined are correct. Championship clubs want 5m extra each.

      Assuming there will be a deal and applying the lowest amount, we will have 14m to 16m more to spend next season.

      This means the following: If we don’t sell or let a single players leave (unrealistic of course – some will of certainly leave) and all other costs and revenues are the same as this season, we can sign up to 8 new players for 5m each this coming summer if we give all of them a four-year contracts with total salary costs of 15k per week per player. This will cost 10m in annual amortisation (40m divided by four) and 6m in salaries, a total of 16m per season.

      The example shows that we are in a very good financial situation next season. Even if Premier League and EFL won’t strike a new deal, we will be doing fine from a financial point of view. We can’t sign new players for 40m, but “just” 30m, if the contract length is four years on average.

      I have not even started considering the possible sale of Eze. If we are due 20% or 25% of the entire sales amount, it would create further significant financial headroom.

      The club might want to spend the money differently than in my example, but the point is that the grim financial situation this season is very temporary, if the owners are ambitious and want to maximise the chance of promotion, while still staying inside the FFP boundaries.
      Nice piece. Although I am not sure you have the “we can sign players for 40m next season” correct. Yes it is amortised over 4 years. But the money has to come from somewhere to pay for the players at the time of transaction. That then goes into the operating profit/loss account for that given season.

      In the given example, 40m would need to be transferred into the other clubs account in that given season (without getting into complications of add ons or payment plans etc).

      Meaning, the owners would have to invest 40m from their own cash accounts. But that itself blows FFP apart given we can only lose/invest a maximum 13m per season. It’s not possible or plausible as far as I can see it unless you can share otherwise?

      It would pretty much max out the amount the owners could invest in FFP terms, pretty much all in one season, thereby repeating the prior errors of the previous 3 year cycle where we blew all the budget in one season. So it’s not realistic.

      Comment


      • #4
        Originally posted by Jonny View Post

        Nice piece. Although I am not sure you have the “we can sign players for 40m next season” correct. Yes it is amortised over 4 years. But the money has to come from somewhere to pay for the players at the time of transaction. That then goes into the operating profit/loss account for that given season.

        In the given example, 40m would need to be transferred into the other clubs account in that given season (without getting into complications of add ons or payment plans etc).

        Meaning, the owners would have to invest 40m from their own cash accounts. But that itself blows FFP apart given we can only lose/invest a maximum 13m per season. It’s not possible or plausible as far as I can see it unless you can share otherwise?

        It would pretty much max out the amount the owners could invest in FFP terms, pretty much all in one season, thereby repeating the prior errors of the previous 3 year cycle where we blew all the budget in one season. So it’s not realistic.
        When a club acquires a player, we have to distinguish between the cash required to pay for the signing and the costs that goes into the profit and loss accounts. If a player is bought for 4m on a four year contract, the club needs 4m in cash to pay the acquisition (either in one go or in instalments, depending on the deal between the selling and buying club). But the cost that is recorded in the profit and loss account is 1m a year for four consecutive seasons. The 1m annual cost is called amortisation (if the player gets sold during these four years, the remaining amount must be amortised right away, but might be outweighed by any potential sales amount).

        Hence, technically, QPR could go on to spend 40m next year, but only record 10m as costs in the 24/25 season if all players are on four year contract. The remaining 30m will be spread over the following three seasons.

        As you say, the money has to come from somewhere. There is only one source of financing for QPR, and that is shareholder loans (that is typically later converted to equity). There has been no lack of willingness among the owners to provide financing up till now, and I see no reason why the owners will not continue to fund the club. If owners finance the club, it does not affect FFP. Theoretically, they can provide one billion pound without compromising FFP. The FFP is about the maximum loss a club is allowed. There is no cap on investments. However, it is pointless to provide more money than the club is allowed to spend, but providing 40m for player acquisition as in my example will not blow FFP apart.

        If QPR invested 40m this coming summer based on the terms I have outlined, the club would not necessarily rack up more losses than 13m per season for the next two years in the FFP cycle. But it will limit the chance to do new acquisitions during the next two years unless the clubs sell players. But the club can invest this amount, if complying with the terms in my example, without jeopardising future FFP calculations. That does not mean that it is the best thing to do. I would keep some of the gun powder dry in case of there was a future need to strengthen the team without being forced to sell first.

        For the record: If a club sells a player, the entire sales amount is booked into the accounts at time of selling, irrespective of the payment terms associated with the transaction. If Eze gets sold, the share that goes to QPR will be booked in the accounts in the year the sales takes place, irrespective of how Palace pays us.

        I don't intend to suggest that QPR will invest 40m in new players on four-year-deals during the summer of 2024, but I want to illustrate the dramatic change in financial circumstances between this and next season. My point is: If we would like to, we could. From various message board posts I sense a misunderstanding, where some supporters might think the present financial straitjacket will continue beyond this season. It won't. We will enjoy more financial freedom that we have had for quite some time. I hope QPR uses it wisely. I hope we can convince Willock to sign a new deal, buy a top Championship striker and a top Championship central midfielder plus a new good keeper. With these reinforcements in place I think we can go places next season, provided we stay up of course.

        Comment


        • #5
          Where are we with Sinclair Armstrongs contract, it all seems to have gone quiet. Id be keen to tie him up for at least 3 years
          I played sunday league football today.

          Clearly I was the best player on the pitch.

          I scored 5 and made 7 last ditch tackles.

          We lost 5-0 but the rest of my team were sh it!

          Comment


          • #6
            Ownership article from NewsNow.

            https://footballleagueworld.co.uk/qp...lth-net-worth/

            Comment


            • #7
              Originally posted by WeAreQPR12 View Post
              Where are we with Sinclair Armstrongs contract, it all seems to have gone quiet. Id be keen to tie him up for at least 3 years
              I think we have one year option on Sinclair.

              I think we should release him this season, three goals is poor.

              Comment


              • #8
                Originally posted by WeAreQPR12 View Post
                Where are we with Sinclair Armstrongs contract, it all seems to have gone quiet. Id be keen to tie him up for at least 3 years
                Why

                Comment


                • #9
                  There has been an update to Conpanies House. A previous loan has been converted into shares and allocated to the person who made the loan instead of being repaid. That person's percentage ownership has therefore gone up.

                  The value of the share allocation amounts to just under 7.5m. Based on the shares in circulation the club is valued at 140m

                  https://find-and-update.company-info...filing-history
                  Last edited by SheepRanger; 22-05-2024, 10:15 AM.

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