Oh, What A Lovely Defecit!

[Arnie_Pie]

I always thought us Reading fans for the most part were pretty bright.

Some of the people on here cannot grasp some basic business facts. The club is a loss making venture. If it were a proper business, trying to make a profit, it would have folded years ago. RFC could be classed as a going concern. I suggest that some of you order the latest set of accounts, which you may be surprised can be done entirely legally for a small fee, from Companies house.

Last returns made up 30/06/2010.

[Hoop Blah]

Arnie, in recent history RFC is a profit making enterprise though. I think what some people struggle to understand is why the profits or levels of re-investment (through transfer fees at least) are so relatively low when you look at the headline income figures.

All that Premier League money we're always hearing about, plus the significant profit on transfers, equates to a lot of cash and we don't see a lot of it spent attracting our most important resource, decent playing staff.

£130m is wages since 2005 should give most a decent start in seeing where the majority of the money has gone.

[Northern Git]

So in my humble view there is nothing in the events of the previous season that would indicate an unexpected shortfall of predicted income, indeed there are several events that would suggest that substantial additional monies have come into the club, FA cup , Playoffs and attached TV monies (even after the additional costs that would have been generated).

So to suggest the sale of Mills fills a ‘unforeseen black hole’ is in my view bollocks, as is the requirement to sell any other player for this reason.
There may have been a player sale required to cover a normal operating costs / income deficit but I think this season that should be at a minimum considering the extra revenue generated by our FA Cup and League play off final games.

If it is any help I can confirm that in the middle of last season the matchday income was below that budgeted and well below what was needed for the then level of spending on the playing staff. I was not told if the size of the squad was what made it over-budget or the wage increase after renegotiated contracts or the increase in coaching staff but I suspect it is all 3.

Svlad is correct in saying that despite what we may all wish even competing the way Reading does (whether that is considered furstrating and lacking ambition or prudent) needs an injection of capital.

As long as there is no ultimate control other than bankruptcy there will always be some willing to spend to achieve success as the industry is all about competition. However it is a fact that there can only be 3 promoted teams under current rules so just spending is not enough, you have to spend more than a fair proportion of the rest of the league, and also have greater skills than the spending indicates unless you are in the top spenders.

The fact that at the present there are no buyers on the horizon and the chairman does/will not inject more money and the banks are not generous in the current climate, there seems one other obvious source of funds - players. As long as the Academy is producing good players we are likely to play at being the new Crewe (or to be fair follow the usual lower league model until Prem clubs bought foreign players).

So what happened after the middle of last season? Extended, televised FA Cup run, improved league form (and gates) leading to Playoff semis and Final (all televised). Did the club brief you on how that impacted on the financials?

I am not suggesting that the principle of selling a player to make up a deficit and break even is 100% bad, just the un-quantified 'gap' (won’t say 'black hole' as it upsets RR) that currently appears at the end of each season now seems to necessitate the sale of players who, if they remained at the club, would improve our chances of success.

We once had the brick by brick approach, now we seem to remove quality from the team on an annual basis - and call it success.

I had hoped that this year, after our near miss last season, the main, quality, building blocks of the team would be retained to give us a strong basis on which to develop. Obviously not going to happen.
Last season we sold the bloke we were building the team round (McDermott’s words – not mine) and it seems the same path is now being followed.

Arnie, if we are still in a loss making position after all the player sales then we realy are totally and utterly in the poo the first season we dont have any 'flesh' to sell

[Svlad Cjelli]

Ther's a big difference between "selling" and being "unable to stop them leaving" - we have developed the key players so much that they feel they are now able to play at a higher level then we can give them and/or demand a greater salary than we have the capacity to pay.

[Arnie_Pie]

Arnie, in recent history RFC is a profit making enterprise though. I think what some people struggle to understand is why the profits or levels of re-investment (through transfer fees at least) are so relatively low when you look at the headline income figures.

All that Premier League money we're always hearing about, plus the significant profit on transfers, equates to a lot of cash and we don't see a lot of it spent attracting our most important resource, decent playing staff.

£130m is wages since 2005 should give most a decent start in seeing where the majority of the money has gone.

Possibly, but all this chat is conjecture without some paper facts. Here are the 2007 accounts - https://rapidshare.com/files/4043802611 ... 140411.pdf

£6.5 million loss in 2006. I expect the losses are around the same if not higher now.

The 2010 accounts are available but I am skint so am not purchasing them.

[Hoop Blah]

Ther's a big difference between "selling" and being "unable to stop them leaving" - we have developed the key players so much that they feel they are now able to play at a higher level then we can give them and/or demand a greater salary than we have the capacity to pay.

...or that they feel the club aren't willing to push on to compete at the level they think/thought we could and so feel their career will be better served elsewhere in the same division.

[Hoop Blah]

Arnie, the P&Ls from the year we went up to 2010 show a profit every year.

[brendywendy]

and i honestly believe its the only sustainable model for us. The hope is of course that the longer we run an excellent academy,the better the kids we recruit,and the better the level of players we produce.the club does grow, in a brick by brick,by removal of the odd brick fashion.

[Arnie_Pie]

Arnie, the P&Ls from the year we went up to 2010 show a profit every year.

Who has got them would be an interesting read.

[Who Moved The Goalposts?]

I think the key to all the misunderstanding is the consistency of the messages coming from the club.

Last year, we were told that the £4m hole for this coming season would need filling. We then sold Marek, Cisse, Henry and Gylfi and lost some huge wage earners. Around £8m in, and about £2m saved on wages, some of which can be offset by the wages of newcomers like Manset and Liegertwood. We then went on to another 1/4 final of the FA Cup and reached the play-off final. That's a lot of unbudgeted income.

Then this close season, Mills goes for £4.5m and we're told none is available for new blood. The figures just don't add up as the goalposts seem to be constantly shifting.

My take is that the club plays its cards very close to its chest as a tool to gain a competitive advantage. The other thing I'm sure of is that none of us - whether we are accountants, STAR, RTGs or STGs - knows the absolute truth and the best we can do is trust the club to do what is right. Only when we face a scenario of failure (ie relegation) can we truly start to argue against this overused "well run club" moniker.

As for me, well I'm a bit of a part time supporter anyway these days. Whilst I love my club and have done for over 40 years, I'm parting with very little of my money in support of this so-called industry. I just cannot see why I should spend my hard-earned whilst the likes of Pompey et al get away with murder and yet still get to compete on a level playing field. How many would bet against Leicester cocking up this season and then having a points deduction over the next season or two and still their name appears on the fixture list come July.

[Hoop Blah]

Arnie, the P&Ls from the year we went up to 2010 show a profit every year.

Who has got them would be an interesting read.

Not sure interesting is the word I'd use...

Just to clarify, that should read that we made a profit for those years after promotion, not including the promotion season.

[Cypry]

We hardly spent anything on buying players in the prem when you supposedly get in the region of 90 million quid...we were there for two seasons.

I think you'll find that promotion from the Championship is worth around £90 million - that is based on one year in the Prem, followed by four years parachute payments (we only got two).

Let's face it, the club runs at a trading loss, income from ticket sales, merchandising, TV money etc, is lower than what it costs to run the club; capital costs, maintaining the facilities, transfers in etc, with the bulk of the costs in players wages.

So we have three options:

1) Reduce the costs so that the club is cost-neutral. It's not possible to reduce maintenance costs etc, so the only feasible option is to reduce your main cost - players wages. The problem is, how do you get, and hold onto good players if you don't pay the going rate? If you pay less, you'll get a poorer stamp of player, and are therefore likely to see results suffer (which is likely to result in a drop in income as attendances fall). So we need to keep control of salaries, whilst paying just sufficiently to deliver what we need on the pitch.

2) Increase income - OK, so we've had some joy in this the last couple of years in the cup runs and play-offs delivering some unexpected windfalls, but I've seen some wild estimates of the amounts taken from these which beggar belief - I'd be surprised if we netted much more than £1 million combined from the cup and play-offs this year once costs are taken into account. Other than that, attendances seem fairly static, so I'd anticipate that income will be little different year on year from last year to this.

3) Trade at a loss, but find something else to fill the shortfall. Now there are a number of ways we could do this:

- borrow from the Banks; not easy in the current climate and given that we were required to pay off our overdraft a couple of years ago, this doesn't look like an option.
- find a rich new owner to bankroll us (as per Leicester); we know no new cash will come from SJM, but he has stated that he won't just up and leave without a "suitable" new owner - for this I think we should thank him.
- sell one or two players a year, who we've developed, at a profit, and use those profits to fill the shortfall.


As it happens, we seem to have a blend of all three. Salaries are effectively under control (although we have been able to meet the requirements of some key players; Jobi, HRK etc), we've been lucky enough to have a bit of extra income from cup runs and play-offs, but we still need to balance the books somehow hence the sale of players such as Mills, Sig etc.

It's unfortunate that this is the way things are, but it's a fine balancing act, and I don't believe that the sale of players and subsequent use of funds to help achieve a break-even point is a surprise to anyone at the club, not least McDermott. In fact, it wouldn't surprise me if his apparent displeasure when explaining that none of the Mills money would be available for transfers, wasn't so much that he was unhappy at the situation, as he was unhappy at being asked the same old question, when everyone knows the answer. He's been with us for more than ten years - he knows the score!

You also have to look at this against a background that results are not declining, we've had two fantastic cup runs, and improved on our league position this year over last - supporting the club certainly isn't boring. Have we suffered from player sales? You can argue that having Sig in this years side could have led to automatic promotion, but then I know a couple of Cardiff fans who thought that having Bellamy would mean they were guaranteed a top two finish - it's all fine in theory, but rarely works out how you think it will...

Before I get flamed, I don't consider myself an RTG, just a realist. In todays climate, you cannot just magic money from thin air, it's right that the books should balance somehow and I for one don't believe that racking up huge debts is the way to go

[Rev Algenon Stickleback H]

Ther's a big difference between "selling" and being "unable to stop them leaving" - we have developed the key players so much that they feel they are now able to play at a higher level then we can give them and/or demand a greater salary than we have the capacity to pay.

...or that they feel the club aren't willing to push on to compete at the level they think/thought we could and so feel their career will be better served elsewhere in the same division.

be honest, once a player gets tapped up and offered two or three times his salary elsewhere, he's not going to stay unless he's playing for the club of his dreams.

[facaldaqui]

We hardly spent anything on buying players in the prem when you supposedly get in the region of 90 million quid...we were there for two seasons.

I think you'll find that promotion from the Championship is worth around £90 million - that is based on one year in the Prem, followed by four years parachute payments (we only got two).

Let's face it, the club runs at a trading loss, income from ticket sales, merchandising, TV money etc, is lower than what it costs to run the club; capital costs, maintaining the facilities, transfers in etc, with the bulk of the costs in players wages.

So we have three options:

1) Reduce the costs so that the club is cost-neutral. It's not possible to reduce maintenance costs etc, so the only feasible option is to reduce your main cost - players wages. The problem is, how do you get, and hold onto good players if you don't pay the going rate? If you pay less, you'll get a poorer stamp of player, and are therefore likely to see results suffer (which is likely to result in a drop in income as attendances fall). So we need to keep control of salaries, whilst paying just sufficiently to deliver what we need on the pitch.

2) Increase income - OK, so we've had some joy in this the last couple of years in the cup runs and play-offs delivering some unexpected windfalls, but I've seen some wild estimates of the amounts taken from these which beggar belief - I'd be surprised if we netted much more than £1 million combined from the cup and play-offs this year once costs are taken into account. Other than that, attendances seem fairly static, so I'd anticipate that income will be little different year on year from last year to this.

3) Trade at a loss, but find something else to fill the shortfall. Now there are a number of ways we could do this:

- borrow from the Banks; not easy in the current climate and given that we were required to pay off our overdraft a couple of years ago, this doesn't look like an option.
- find a rich new owner to bankroll us (as per Leicester); we know no new cash will come from SJM, but he has stated that he won't just up and leave without a "suitable" new owner - for this I think we should thank him.
- sell one or two players a year, who we've developed, at a profit, and use those profits to fill the shortfall.


As it happens, we seem to have a blend of all three. Salaries are effectively under control (although we have been able to meet the requirements of some key players; Jobi, HRK etc), we've been lucky enough to have a bit of extra income from cup runs and play-offs, but we still need to balance the books somehow hence the sale of players such as Mills, Sig etc.

It's unfortunate that this is the way things are, but it's a fine balancing act, and I don't believe that the sale of players and subsequent use of funds to help achieve a break-even point is a surprise to anyone at the club, not least McDermott. In fact, it wouldn't surprise me if his apparent displeasure when explaining that none of the Mills money would be available for transfers, wasn't so much that he was unhappy at the situation, as he was unhappy at being asked the same old question, when everyone knows the answer. He's been with us for more than ten years - he knows the score!

You also have to look at this against a background that results are not declining, we've had two fantastic cup runs, and improved on our league position this year over last - supporting the club certainly isn't boring. Have we suffered from player sales? You can argue that having Sig in this years side could have led to automatic promotion, but then I know a couple of Cardiff fans who thought that having Bellamy would mean they were guaranteed a top two finish - it's all fine in theory, but rarely works out how you think it will...

Before I get flamed, I don't consider myself an RTG, just a realist. In todays climate, you cannot just magic money from thin air, it's right that the books should balance somehow and I for one don't believe that racking up huge debts is the way to go

You won't get flamed for that. A lot of us look at it the same way. The "where has the money gone?" brigade are relatively few: most people grasp the fact that we have to sell big-profit players to operate at the level we do. And, for all his faults, Madejski does seem to understand that we need depth in all positions, so I'm not worried yet about us starting the season without enough centre backs.

[Hoop Blah]

Rev, of course not, and I don't blame the players in most instances. I was just playing devils advocate really.

I guess in some ways it's the 'ambition' we show that dictates being able to compete with our peers in the Championship (and I'm not suggesting we should overstretch ourselves chasing the dream).

[Ian Royal]

Two things.

1) Finerain, it's all well and good saying why didn't we spend even another £5m of the £37m you're talking about. But that amount has come over what? 3 seasons? That's an extra £1.6m a season, which is one £1m player on about £10k a week (leaving a couple of £k for employer cost things). Is that really going to have reliably made a huge difference to how we did? And where does it stop?

It's not a case of a one off investment, that extra money has to keep going in, in wages and in replacing players who will move on to bigger clubs or leave through age, injury or failure. This is where the problem occurs. It's not a one off thing that suddenly you go bust, it's that it spirals out of control until you've built up massive debts over half a dozen seasons and can no longer cope. And then, if you're lucky, it takes those same half a dozen seasons to put you back to roughly the same place you were before.

You can't pay it off when you get to the PL, unless you resign youself to coming straight back down and keep wages very low, because you spend that money trying to stay up. And the parachute payments are there so you don't have to sell essentially an entire team you can no longer otherwise afford.

You also look at headline figures for income (getting them wrong, it wasn't £90m, that's the value of promotion now which includes 4 years of guaranteed parachute payments, it was about £60m over two years.) I'll take your claims for transfers at face value although you seemed to be saying that included parachute payments earlier. But you don't actually look at expenditure. You make ill informed guesses. Our wage budgets have been shown time and time again, to have eaten the PL TV money. You ignore all the money we have spent on tranfer fees.

2) I also don't get people saying the "blackhole" was supposedly covered by Gylfi was for this season. That's not how I remember it, so please correct me with a quote from the club, but I recall it as the "blackhole" between income and expenditure, by the end of last season, so May 2011.

Well you don't just pay that once and get rid of it, if it's a deficit, it's what our debt would increase by, so unless you make significant changes to our spending (which I don't think we have, certainly not to the budget we plan to) you have to pay that every year. Mills money goes to cover what we'd have built up by the end of this season, and I've seen nothing to suggest otherwise.

Oh and finally, as for the suggestion that MaccyD shouldn't have said we wouldn't be spending the Mills money, are you out of your freaking tree!!!! You mean the club should have left the fans expecting it to spend £4m on players when it had absolutely no intention of doing so?! Are you for real?! That would have been a disaster the club would be right in getting a slating for.

[FiNeRaIn]

Two things.

1) Finerain, it's all well and good saying why didn't we spend even another £5m of the £37m you're talking about. But that amount has come over what? 3 seasons? That's an extra £1.6m a season, which is one £1m player on about £10k a week (leaving a couple of £k for employer cost things). Is that really going to have reliably made a huge difference to how we did? And where does it stop?

I've never said that anywhere, what I said was we should spend the 5 million we got for mills on 3 replacements THIS season, if we sell long. That is absolutely MORE than reasonable. How can people sit there and see our best players sold and be happy with no or cheap unproven replacements. Can you imagine the fans reaction if something like that happened at other cubs?

Just whats the point in being a reading fan anymore when as soon as we start building rapport with the players or start to feel we are moving in the right direction the club flog our players off. Its frustrating beyond belief.

[brendywendy]

Ther's a big difference between "selling" and being "unable to stop them leaving" - we have developed the key players so much that they feel they are now able to play at a higher level then we can give them and/or demand a greater salary than we have the capacity to pay.

...or that they feel the club aren't willing to push on to compete at the level they think/thought we could and so feel their career will be better served elsewhere in the same division.

the same applies to every club except barca. Players will always want to move upwards.with mills he just wanted out,and we took the highest offer.

[Ian Royal]

Two things.

1) Finerain, it's all well and good saying why didn't we spend even another £5m of the £37m you're talking about. But that amount has come over what? 3 seasons? That's an extra £1.6m a season, which is one £1m player on about £10k a week (leaving a couple of £k for employer cost things). Is that really going to have reliably made a huge difference to how we did? And where does it stop?

I've never said that anywhere, what I said was we should spend the 5 million we got for mills on 3 replacements THIS season, if we sell long. That is absolutely MORE than reasonable. How can people sit there and see our best players sold and be happy with no or cheap unproven replacements. Can you imagine the fans reaction if something like that happened at other cubs?

Just whats the point in being a reading fan anymore when as soon as we start building rapport with the players or start to feel we are moving in the right direction the club flog our players off. Its frustrating beyond belief.

What a silly way of looking at it. Why not spend some of the Long money, IF / WHEN we sell Long, rather than complaining we aren't spending Mills money because money we might not get from Long, who we haven't sold yet, can cover the deficit.

Why do you insist on complaining about what hasn't happened yet?

Also, this certainly looks like you did say that to me. If you've been misleading by accident, that's fine.

You don't get it, who is saying gamble the clubs future? You seriously think spending 5 million on players is going to send us into administration out of the 37 million + parachute payments since we have been relegated....like really?

[brendywendy]

Two things.

1) Finerain, it's all well and good saying why didn't we spend even another £5m of the £37m you're talking about. But that amount has come over what? 3 seasons? That's an extra £1.6m a season, which is one £1m player on about £10k a week (leaving a couple of £k for employer cost things). Is that really going to have reliably made a huge difference to how we did? And where does it stop?

I've never said that anywhere, what I said was we should spend the 5 million we got for mills on 3 replacements THIS season, if we sell long. That is absolutely MORE than reasonable. How can people sit there and see our best players sold and be happy with no or cheap unproven replacements. Can you imagine the fans reaction if something like that happened at other cubs?

Just whats the point in being a reading fan anymore when as soon as we start building rapport with the players or start to feel we are moving in the right direction the club flog our players off. Its frustrating beyond belief.

i will be gutted if we sell long and mills and dont replace them too.but i think we will. And if we dont we will replace injurys with loans until jan,and if it looks shaky, well have money to get back on track. Dont think i like losing good players either.but if they want to go,and someone offers a high,fair and profitable amount theyll go. And i dont think we can, or should stop them. We actually have a decent record of holding players longer than we should have done.sig and mills aside.