This is what I hear a lot from fellow Leeds fans: £6M for Cook, £3.7M for Byram, £11M for McCormack. We should be rich, right? So the logical conclusion is that Massimo is pocketing it. I don’t buy it, and we should direct our ire towards GFH when it comes to our financial mire. Let’s take a look at our finances over the past few years:
A quick aside for those not familiar with footballing accounting practices. If you are, feel free to skip this bit. Firstly, EBITDA stands for earnings before interest, taxes, depreciation and amortisation and it’s a good measure of the underlying profitability of the club. Player amortisation works by applying the cost of the transfer fee over the course of a player’s contract. So if a player signs for £15M on a 5-year deal, the cost is shown at £3M in each of the next 5 seasons. Easy, right?
Profit on player sales is a little more complicated. That is calculated as the transfer fee received minus the amount that we still have left to amortise, or write down. This is easiest with an example, so imagine that we sell our £15M player after 2 years for £25M. We would amortise £3M in year 1, £3M in year 2 so we would have £9M of player value still on our books. The £20M fee – £9M value would mean it would go in the books as an £11M profit on player sales. Yeah, accounting is weird.
Under Bates we were roughly at break-even profitability. We decried him for spending money on the wrong things (like refurbishing the East Stand instead of investing in the playing squad) and that was probably a fair criticism. But when he sold the club we were in a reasonably stable position. We didn’t have any huge sales except Fabian Delph in 09/10 and the decimation of the squad in 11/12, as Howson, Johnson, Gradel and Schmeichel all left.
This all changed in the absolute shitstorm that was GFH Capital’s ownership of the club. Turnover plummeted whilst costs spiralled and the club went from one that was breaking even to one that was losing over £10M per year. Prudent financial management it was not. This is the period where the mysterious ‘other costs’ rose and the money disappeared through mismanagement or plain theft, not Cellino’s reign. It has since come back down to levels below the end of Bates’ tenure.
Now we enter the period where Cellino takes over. His first season is 14/15 and here we sold Ross McCormack for £11M but we spent a fair chunk of money too. We bought in 19 players over the course of the season including: £2.5M on Bellusci, £2M on Doukara, £700K on Sloth, £600K on Antenucci and a few at roughly half million each. We had a drastic, scattergun remodelling of our squad. The issue here isn’t that we didn’t invest in the squad, it’s that we spent the money badly, that Cellino didn’t make the small and wise investment in a proper recruitment structure that could have saved money and given us a better playing squad. Of the 19 we signed, I can call only 3 successful – Cooper, Berardi and Bamba with an argument for Silvestri as semi-successful.
The summer of 15/16 came round and once again we spent money. Wood for £3M, Dallas for £1.5M without any significant outgoings. We cleared the wage bill a fair chunk with Billy Sharp, Morison, Austin and Tonge all leaving the books and I would expect the club to move one step closer to sustainability. It was a window that left us in better shape than the end of the 13/14 season. We sold Byram in January with 6 months left on his deal, and got £3.5M for him, which almost covered the cost of the summer window. The accounts aren’t out for 15/16, but I would expect to see the wage bill come down from £20M and the underlying EBITDA move closer to zero, though still in losses.
This season, true to form, we have made another large sale to fund our transfer activity. Lewis Cook goes for £6M for 12 months left on his contract and not signing another one. Where has all this money gone? Well, some of it goes towards covering the still existing losses, but we’ve spent £3M on Roofe, £1-2M on Antonsson. To be honest, I think the squad is in better shape overall, I see it like this: Green > Silvestri, Bartley > Bellusci, Antonsson > Antenucci, Roofe > Carayol, Sacko > ‘Gap’. Yes, Cook is better than Grimes and we need another centre-back and possibly a midfielder, but I would do a straight swap of our squad at the end of 14/15 to now.
Now, I want to make it very clear that there are many ways Cellino has mismanaged the club. 6 managers in 2.5 years, the Steve Thompson affair, David Hockaday, Macron dispute, Lucy Ward, the treatment of Evans and Redfearn. I can go on. Believe me, I won’t be upset in the slightest if Cellino goes and I think his erratic nature is one of the biggest roadblocks to our progress.However, I think we need to view things in balance and understand our club finances so we can direct our anger rightfully. The £11M in legal fees and court cases is a shambles, but it doesn’t change the reality of a fundamentally unprofitable club (EBITDA excludes one-off items like legal fees) and it has meant that Cellino has had to cover higher losses by loaning the club more money. This isn’t £11M that we would have available to spent on the squad. The spiralling costs, falling turnover and disappearing money all happened under GFH, and they left the club up shit creek without a paddle. They are where we should direct the anger for the financial situation.
So, what’s the way to solve it? The answer is smart recruitment. We can go down the route of signing ‘proven’ players for the premium that demands, but in my view that wouldn’t be the way to challenge. The way to build a winning squad is to have better methods for finding the best unproven players, buying them with a view to selling a small proportion of them for a higher fee and keeping the rest to build a squad. This is the only sustainable way – we are competing with clubs where the parachute payments are equal to our entire turnover in the first year and half the division is getting a windfall of 1.5 Lewis Cook-s each year. We can’t go up by outspending out rivals, we can only go up by outsmarting them.
Which is why we should hire Ted Knutson.
Proper Football Nerds 