Explain like I'm five: our FFP crisis

[Hound]

Although it seems a pitiful situation, Dai and his sister have not been shy in bank rolling the club since May 2018, rightly or wrongly. And according to Jose they continue to be motivated to plough more money in to help improve our position, although current FFP rules prevent them from doing so.

They have continued to push ahead with Bearwood, as this investment falls outside of FFP rules. Ploughing more money in even with a huge operating loss, shows commitment.

I have a feeling the owners and those now making the decisions will again be creative and get 3 or 4 very decent loan players in for next season, as well as a couple of frees on sustainable contracts. Not being able to do anything until July 1st also gives them time to work on moving players out; McNulty, Popa, Kelly, Mayler and a few others. Get through 19/20 season and we’ll have a clean FFP slate, a new training facility and owners who have proved to be financially supportive, only this time around they will be a lot wiser due to mistakes they and those before them have made.

I’m looking forward to next season and watching an honest group of players playing for the club and fans… It will make a nice bloody change.

Good post. Perhaps our owners were a little naive allowing Gourlay so much control but overall they have backed the club to the hilt and deserve a lot more than they have had back.

Yes, a good positive post

I agree, get through the season and things will look a lot brighter. Big contracts (Meyler, GMac,Gunter, Popa, Mannone) will have come to an end along with a number of others. Young players with a year of champ experience. New training ground, room in FFP to sensibly invest

We’ve still got a solid enough team if we can plug a few gaps this year. It’s not all doom and gloom

[topfuller]

Great post, I think I actually understand.

[maffff]

I've been meaning to take a stab at replying to this all day, but the day has gotten away from me.

You may have seen my recent article for The Tilehurst End.

https://thetilehurstend.sbnation.com/20 ... reading-fc

I'd have a read of that as a starter.

So what we know is immediately after the playoff final season our parachute payments ended, meaning this would generally become the beginning of fiscal prudence to balance out, however we (ludicrously when you look at who it was spent on) went for it. This meant by the end of the season before last we had a bloated squad and a £20m hole in the £39m you can lose over 3 years, wages in excess of income and an underperforming team.

We won't have managed to overcome these issues last season the squad remains bloated, players on high wages and a low to middling level of income. Which means we will have made a loss. No doubt less than the £20m, but a further sizeable chunk into the £39m we can lose up to the end of this coming season.

Assuming we have a high wages to income ratio (we do) and a small percentage of the 3 year cycle left, then there must be concerns in the FA that we are on track to miss ffp by the end of the coming season - so they have intervened with a soft embargo (meaning we have to show how we will comply) until our profit and sustainability is healthier.

Once we can show we can comply this will presumably ease.

The £20m post playoffs is a massive burden, which was partially offset by a profit the year before which made it look healthier. Now that's gone the £39m is tight.

We do, however, need to either work on improving our income or reducing our outgoings - or a combination of both. While we won't generally lose £20m a year, our ability for the owners to invest will remain constrained and minimal, unless we look for alternative creative routes (ie, other clubs, ground and other forms of sponsorship). We already sold the ground and leased it back, which have us the ability to not break ffp so far but presumably also takes a set of running costs off the books, such as the semi regular new pitches...

[maffff]

. We then made little attempt to cut our cloth on relegation and got into the first big financial issue with Zingaravich bailing leaving us with a huge dodgy Vibrac loan.

Another positive example of Chinese backing is the reduction in interest payments out in last year's financial accounts. The historic loans have been taken in house, VIBRAC has FINALLY completely gone as have all the others that existed throughout and to the Thai tenure.

The Chinese seem naive, but supportive of the club and backing us as much as they can (particularly where ffp constraints don't apply).

If we do get past this and into a period where we can thrive then someone like Nigel Howe is what's needed, rather than Gourlay talking a big game and spending for that while offering seemingly very little. A manager like Gomes willing to incorporate academy players is also a massive plus.

[URZZZZ]

I've been meaning to take a stab at replying to this all day, but the day has gotten away from me.

You may have seen my recent article for The Tilehurst End.

https://thetilehurstend.sbnation.com/20 ... reading-fc

I'd have a read of that as a starter.

So what we know is immediately after the playoff final season our parachute payments ended, meaning this would generally become the beginning of fiscal prudence to balance out, however we (ludicrously when you look at who it was spent on) went for it. This meant by the end of the season before last we had a bloated squad and a £20m hole in the £39m you can lose over 3 years, wages in excess of income and an underperforming team.

We won't have managed to overcome these issues last season the squad remains bloated, players on high wages and a low to middling level of income. Which means we will have made a loss. No doubt less than the £20m, but a further sizeable chunk into the £39m we can lose up to the end of this coming season.

Assuming we have a high wages to income ratio (we do) and a small percentage of the 3 year cycle left, then there must be concerns in the FA that we are on track to miss ffp by the end of the coming season - so they have intervened with a soft embargo (meaning we have to show how we will comply) until our profit and sustainability is healthier.

Once we can show we can comply this will presumably ease.

The £20m post playoffs is a massive burden, which was partially offset by a profit the year before which made it look healthier. Now that's gone the £39m is tight.

We do, however, need to either work on improving our income or reducing our outgoings - or a combination of both. While we won't generally lose £20m a year, our ability for the owners to invest will remain constrained and minimal, unless we look for alternative creative routes (ie, other clubs, ground and other forms of sponsorship). We already sold the ground and leased it back, which have us the ability to not break ffp so far but presumably also takes a set of running costs off the books, such as the semi regular new pitches...

Informative and helpful, thanks for that

Quick question, not sure if you know the answer but how do teams like Derby get away with spending what they do each season? They haven’t been in the Prem for a long time now which rules out parachute payments. I don’t really follow finances so I’m a bit clueless on it all really

[maffff]

I've been meaning to take a stab at replying to this all day, but the day has gotten away from me.

You may have seen my recent article for The Tilehurst End.

https://thetilehurstend.sbnation.com/20 ... reading-fc

I'd have a read of that as a starter.

So what we know is immediately after the playoff final season our parachute payments ended, meaning this would generally become the beginning of fiscal prudence to balance out, however we (ludicrously when you look at who it was spent on) went for it. This meant by the end of the season before last we had a bloated squad and a £20m hole in the £39m you can lose over 3 years, wages in excess of income and an underperforming team.

We won't have managed to overcome these issues last season the squad remains bloated, players on high wages and a low to middling level of income. Which means we will have made a loss. No doubt less than the £20m, but a further sizeable chunk into the £39m we can lose up to the end of this coming season.

Assuming we have a high wages to income ratio (we do) and a small percentage of the 3 year cycle left, then there must be concerns in the FA that we are on track to miss ffp by the end of the coming season - so they have intervened with a soft embargo (meaning we have to show how we will comply) until our profit and sustainability is healthier.

Once we can show we can comply this will presumably ease.

The £20m post playoffs is a massive burden, which was partially offset by a profit the year before which made it look healthier. Now that's gone the £39m is tight.

We do, however, need to either work on improving our income or reducing our outgoings - or a combination of both. While we won't generally lose £20m a year, our ability for the owners to invest will remain constrained and minimal, unless we look for alternative creative routes (ie, other clubs, ground and other forms of sponsorship). We already sold the ground and leased it back, which have us the ability to not break ffp so far but presumably also takes a set of running costs off the books, such as the semi regular new pitches...

Informative and helpful, thanks for that

Quick question, not sure if you know the answer but how do teams like Derby get away with spending what they do each season? They haven’t been in the Prem for a long time now which rules out parachute payments. I don’t really follow finances so I’m a bit clueless on it all really

Unlike us, who sold our stadium at its value, they've sold theirs for double the worth - which is apparently being looked at as a potential attempt at cheating ffp. Morris has looked to have a big profit in per 3 year cycle to offset. Others I don't know, Leeds, Villa etc have considerably larger income for a start which means the outgoings can be much larger.

[maffff]

I'm assuming it's the reasons above. Alternatively could another reason for a soft embargo be that we've done something which isn't in the spirit of ffp - ie trying to balance a hefty loss by bringing in a stupid fee for sending a player to a club overseas owned by the same owners? Just an afterthought.

[muirinho]

I've been meaning to take a stab at replying to this all day, but the day has gotten away from me.

You may have seen my recent article for The Tilehurst End.

https://thetilehurstend.sbnation.com/20 ... reading-fc

I'd have a read of that as a starter.

So what we know is immediately after the playoff final season our parachute payments ended, meaning this would generally become the beginning of fiscal prudence to balance out, however we (ludicrously when you look at who it was spent on) went for it. This meant by the end of the season before last we had a bloated squad and a £20m hole in the £39m you can lose over 3 years, wages in excess of income and an underperforming team.

We won't have managed to overcome these issues last season the squad remains bloated, players on high wages and a low to middling level of income. Which means we will have made a loss. No doubt less than the £20m, but a further sizeable chunk into the £39m we can lose up to the end of this coming season.

Assuming we have a high wages to income ratio (we do) and a small percentage of the 3 year cycle left, then there must be concerns in the FA that we are on track to miss ffp by the end of the coming season - so they have intervened with a soft embargo (meaning we have to show how we will comply) until our profit and sustainability is healthier.

Once we can show we can comply this will presumably ease.

The £20m post playoffs is a massive burden, which was partially offset by a profit the year before which made it look healthier. Now that's gone the £39m is tight.

We do, however, need to either work on improving our income or reducing our outgoings - or a combination of both. While we won't generally lose £20m a year, our ability for the owners to invest will remain constrained and minimal, unless we look for alternative creative routes (ie, other clubs, ground and other forms of sponsorship). We already sold the ground and leased it back, which have us the ability to not break ffp so far but presumably also takes a set of running costs off the books, such as the semi regular new pitches...

Informative and helpful, thanks for that

Quick question, not sure if you know the answer but how do teams like Derby get away with spending what they do each season? They haven’t been in the Prem for a long time now which rules out parachute payments. I don’t really follow finances so I’m a bit clueless on it all really

Unlike us, who sold our stadium at its value, they've sold theirs for double the worth - which is apparently being looked at as a potential attempt at cheating ffp. Morris has looked to have a big profit in per 3 year cycle to offset. Others I don't know, Leeds, Villa etc have considerably larger income for a start which means the outgoings can be much larger.

Somebody told me that Villa have been paid some massive sum in compensation as their training ground is being bisected by HS2, and this has helped them avoid FFP issues. Apparently, they can use the compensation as income to offset losses - but the money they actually spend redoing the Academy and training ground is excluded from FFP. (so they haven't profited in real terms, just in FFP terms!)

[From Despair To Where?]

I presume we can't just sell Bearwood to a third party, pay a peppercorn rent for 2 years then buy it back for the same price and write it off against FFP as an Academy expenditure?

I suppose if we could, everyone would already be doing it.

[Hound]

has Hogwood been sold/do we own it?

[Clockwatcher]

Re Hogwood
If you look at the Wokingam planning website there is a planning application in for approx 45 houses but it does not say who the developer is......

[muirinho]

Re Hogwood
If you look at the Wokingam planning website there is a planning application in for approx 45 houses but it does not say who the developer is......

Interesting. I always thought Hogwood was leased by the club, but cannot tell you from who! Maybe still owned by JM?

[sandman]

Easy to explain 2WW1WC.

A crook who was in charge of UEFA and has been arrested recently introduced a financial system called Financial Fair Play backed by FIFA and some of the biggest clubs in the World.

He disguised this financial system as doing good, saying that it was there to make sure clubs "spent money they have" and "to stop situations like Portsmouth and Malaga". In reality it was there to keep the traditional big clubs at the top and stop the Sheikhs and the Obligarchs from investing in clubs and challenging that dominance. So they punished investment in clubs and made sure that the clubs with the highest revenues stay on top.

We are now in a situation where we have owners who have shown through development of the training ground and the academy that they have the money to invest in not only the future if the club ut it's present as well. Unfortunately they can't due to these rules that try to squash any notion of competition.

[Millsy]

Easy to explain 2WW1WC.

A crook who was in charge of UEFA and has been arrested recently introduced a financial system called Financial Fair Play backed by FIFA and some of the biggest clubs in the World.

He disguised this financial system as doing good, saying that it was there to make sure clubs "spent money they have" and "to stop situations like Portsmouth and Malaga". In reality it was there to keep the traditional big clubs at the top and stop the Sheikhs and the Obligarchs from investing in clubs and challenging that dominance. So they punished investment in clubs and made sure that the clubs with the highest revenues stay on top.

We are now in a situation where we have owners who have shown through development of the training ground and the academy that they have the money to invest in not only the future if the club ut it's present as well. Unfortunately they can't due to these rules that try to squash any notion of competition.

Corruption in football!?

Makes a lot of sense though. How are we meant to pull ourselves out? Hopefully though investment in the academy will see us through.

[Greatwesternline]

To anyone criticising FFP as maintaining the status quo, what is the alternative?

Allowing clubs to borrow loads, get promoted at the expense of clubs who try to do it properly, and create a situation where every club has an incentive to unsustainably spend money on players they cant afford?

You dont need to spend money to be successful. Spurs got to the Champions league final, no new players in 18 months. Lower salaries than 5 other PL clubs.

Ajax got to semi finals of Champions league, almost no spend.

Few years ago Dortmund got to final low spend.

Leciester won the league, low spend.

Leeds almost got promoted, low spend.

Reading got promoted in 2005/06 with relatively low spend.

It can be done, and doing it the right way is fair on everyone.

[Zip]

To anyone criticising FFP as maintaining the status quo, what is the alternative?

Allowing clubs to borrow loads, get promoted at the expense of clubs who try to do it properly, and create a situation where every club has an incentive to unsustainably spend money on players they cant afford?

You dont need to spend money to be successful. Spurs got to the Champions league final, no new players in 18 months. Lower salaries than 5 other PL clubs.

Ajax got to semi finals of Champions league, almost no spend.

Few years ago Dortmund got to final low spend.

Leciester won the league, low spend.

Leeds almost got promoted, low spend.

Reading got promoted in 2005/06 with relatively low spend.

It can be done, and doing it the right way is fair on everyone.

+1. In addition do we really want our owners to go on another spending spree and see our debts rack up. No thanks.

[Hound]

I’m very happy for our owners to invest in the ground, training ground, infrastructure etc

And that doesn’t come under FFP of course

[URZZZZ]

To anyone criticising FFP as maintaining the status quo, what is the alternative?

Allowing clubs to borrow loads, get promoted at the expense of clubs who try to do it properly, and create a situation where every club has an incentive to unsustainably spend money on players they cant afford?

You dont need to spend money to be successful. Spurs got to the Champions league final, no new players in 18 months. Lower salaries than 5 other PL clubs.

Ajax got to semi finals of Champions league, almost no spend.

Few years ago Dortmund got to final low spend.

Leciester won the league, low spend.

Leeds almost got promoted, low spend.

Reading got promoted in 2005/06 with relatively low spend.

It can be done, and doing it the right way is fair on everyone.

+1. In addition do we really want our owners to go on another spending spree and see our debts rack up. No thanks.

Yes. Chucking money at things very often causes failure unless you really pinpoint a player and don’t just buy for the sake of it (like Liverpool with Van Dijk). You have teams like Forest and Derby who spend for spending sake and they very often fail to deliver

I think certainly in today’s climate, big money signings require the player to have a strong personality. Players are judged within two or three games and confidence can plummet. I think that scenario can certainly relate to Aluko

IIRC weve had three or four record signings. Fae, Ilori, Aluko. Disaster, semi disaster and disaster. We, as a club, have always succeeded with smaller budgets, looking out for bargains

[3points]

Yes because 20/21 will only matter alongside 2018/19 and 2019/20. Next season will be a struggle.

And of course, the financial clusterfcuk of 2017/18 is exacerbated this season by the fact we made a profit in 2016/16 which mitigated against it last season but is now off the books for FFP.

The other issue is that we don’t know what the loss is going to be in 18/19. A bloated squad won’t have helped. Nor will our declining income. Transfer spend was better though with the sales of Bacuna and Ilori.

But we did blow £5m on Baldock apparently

[Zip]

And of course, the financial clusterfcuk of 2017/18 is exacerbated this season by the fact we made a profit in 2016/16 which mitigated against it last season but is now off the books for FFP.

The other issue is that we don’t know what the loss is going to be in 18/19. A bloated squad won’t have helped. Nor will our declining income. Transfer spend was better though with the sales of Bacuna and Ilori.

But we did blow £5m on Baldock apparently

I oxf*rd well hope not!