The Swiss Ramble

Time 2021-10-18 10:06:28

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The Swiss Ramble

Tuesday, January 31, 2017 Chelsea - The Band Wore Blue Shirts
This season has seen a return to form for Chelsea followingthe appointment of Antonio Conte. The former manager of Italy is famed for hispassion, but also possesses much tactical astuteness, as evidenced bypreviously leading Juventus to three consecutive Serie A titles. Under his guidance, Chelsea are currently settingthe pace and look a very good bet for the league title.
This demonstrates just how quickly things can change infootball, as the 2015/16 season was Chelseas worst in the Roman Abramovich erawith the club slumping to a disappointing tenth place in the Premier League,thus failing to qualify for Europe for the first time in 20 years. Thisinevitably resulted in the departure of José Mourinho, the self-proclaimedspecial one, with the reins handed to Guus Hiddink until Contes arrival.
This dismal performance was matched off the pitch with the2015/16 accounts revealing a 70 million pre-tax loss, around 49 million worsethan the previous seasons 21 million deficit.

In fairness, this was predominately due to 75 million ofexceptional expenses, largely 67 million to terminate the Adidas kit suppliercontract in favour of a significantly more lucrative deal with Nike, plus 8million compensation to Mourinho and his team. Without these exceptionals,Chelsea would have reported a profit before tax of 5 million.
Revenue rose 15 million (5%) to a record level of 329million, as commercial income increased by 9 million (8%) to 117 millionfollowing the new shirt sponsorship with Yokohama Tyres.
Broadcasting income was also up 7 million (5%) at 143million with the higher UEFA deal increasing Champions League distribution byaround 20 million, though this was partly offset by the 12 million reductionin Premier League TV money due to the lower league finish. Gate receipts fellslightly by 1 million to 70 million.
"U Got The Look"
In addition, profits on player sales increased by 8 millionto an impressive 49 million, principally due to the sales of Ramires toJiangsu Suring, Petr Cech to Arsenal, Mo Salah to Roma, Oriol Romeu toSouthampton and Stipe Perica to Udinese.
In contrast, the wage bill rose by 7 million (3%) to 222million, while player amortisation also increased 2 million (2%) to 71million, though other expenses were 11 million lower at 71 million.
It is also worth noting the enormous 29 million loss thatChelsea made on cash flow hedges, as FX movements dramatically reduced thevalue of their forward currency contracts, presumably due to Brexit. This tooktheir comprehensive loss to 99 million.
For comparison, Manchester United reported a similar 38million loss on cash flow hedges, while this was not yet an issue for Arsenalor Manchester City, whose accounts closed on 31 May (i.e. pre-Brexit).

Chelseas 70 million loss is likely to be the worstfinancial performances in Englands top flight in 2015/16. The only other clubto have announced a loss so far is Everton with 24 million.
In contrast, six of the eight Premier League clubs that havepublished their accounts to date for last season have reported profits, thelargest being Manchester United 49 million, Manchester City 20 million and NorwichCity 13 million, followed by Arsenal 3 million, Stoke City 2 million andWest Bromwich Albion 1 million.
Although football clubs have traditionally lost money, theincreasing TV deals allied with Financial Fair Play (FFP) mean that the PremierLeague these days is a largely profitable environment with only six clubslosing money in 2014/15. This group largely comprised clubs that have beenbadly run (Aston Villa, Sunderland and QPR), but also included ManchesterUnited, Everton and, yes, Chelsea.

Chelseas loss would have been even higher without thebenefit of 49 million profit on player sales, which will certainly be one ofthe highest in the Premier League in 2015/16, if not the highest.
Of course, Chelsea are no strangers to making losses in theAbramovich era, as they have invested substantially to first build a squadcapable of winning trophies and then to keep them at the top of the pile.

Since the Russian acquired the club in June 2003, it hasreported aggregate losses of 753 million, averaging 58 million a season,though there has been some improvement since the spectacular 140 million lossin 2005 with Chelsea posting profits in two of the last five years.
The first profit made under the Abramovich ownership was asmall 1 million surplus in 2012, though this did owe a lot to 18 millionprofit arising from the cancellation of preference shares previously owned byBSkyB, while they were also profitable in 2014.
Chairman Bruce Buck has consistently maintained that theclubs objective is sustainability: It has long been our aim for the businessto be stable independent of the teams results and we continue to reinforcethat.

Chelseas figures have consistently suffered from so-calledexceptional items, which have increased costs by an amazing 202 million since2005.
Leading the way are two early terminations of shirtsponsorship agreements 93 million and money paid as compensation paid todismissed managers 69 million, though the list also includes impairment ofplayer registrations 28 million, tax on image rights 6 million, impairment ofother fixed assets 5 million and loss on disposal of investments 1 million.
On the bright side, Chelsea appear to be learning from theirmistakes, as the recent pay-off to Mourinho and his coaching team of 8 millionwas around a third of the 23 million it cost in 2008.
It is not clear whether the 5 million reportedly paid toformer club doctor Eva Carneiro following an employment tribunal was includedin this years accounts or will only be booked next year.

However, it is profit from player sales that is having anincreasing influence on Chelseas figures. In the nine years between 2005 and2013, Chelsea averaged 13 million profit from selling players, but this hasshot up to an average of 52 million in the three years since then.
Last year included the eye-catching 25 million sale ofRamires to China, while previous seasons featured some other big money moves:David Luiz (PSG) 40 million, Juan Mata (Manchester United) 32 million, RomeluLukaku (Everton) 28 million, André Schürrle (Wolfsburg) 22 million and KevinDe Bruyne (Wolfsburg) 17 million.
It is notable how much more money Chelsea make from playersales than their direct rivals, e.g. over the last three seasons Chelsea earned155 million, compared to just 38 million at Arsenal, 35 million atManchester City and 21 million at Manchester United. Although Tottenham,Liverpool and Southampton also generate substantial sums from transfers, thisis more understandable, given their revenue shortfalls.
"Put on your dancing shoes"
Next years accounts will be more of the same following the 60million sale of Oscar to Shanghai SIPG. This trend of players making lucrativemoves to China has clearly benefited the club financially, but it has not metwith Contes full approval, We are talking about an amount of money which isnot right, though fans of other clubs could be forgiven for thinking that thisis a bit rich, coming from a Chelsea manager.
Indeed, led by Marina Granovskaia, one of Abramovichsclosest associates, Chelsea have perfected a model whereby they consistentlymake money from player sales. As well as the big ticket deals alreadymentioned, Chelsea have also made extensive use of the loan system with anincredible 35 players currently listed as being out on loan (though I may well have lost count).
Although the club argues that this strategy is simply aimedat giving players experience, it is difficult not to believe that this isprimarily a money making exercise. Given that very few of these players havesucceeded in establishing themselves in Chelseas first team, it would appearthat the objective is to develop players for future (profitable) sales, whileeffectively placing them in the shop window.
"Oh, sit down, sit down next to me"
The most recent example is Patrick Bamford, signed for 1.5million in 2012, and sold to Middlesbrough this month for a fee of 6 million,potentially rising to 10 million with add-ons, even though he never appearedfor Chelseas first team. During the last five years the England U21international has been loaned out no fewer than six times.
From a financial perspective, this is a smart move that hashelped Chelsea meet the Financial Fair Play (FFP) regulations, though the moralcounterpoint was delivered by FIFA President Gianni Infantino, It doesnt feelright for a club to just hoard the best young players and then to park themleft and right. Its not good for the development of the player.
However, even though some might complain that this policy smacksof treating players like commodities (buy low, sell high), not to mentionensuring that rival clubs cannot access promising talent, there are (currently)no rules against it and other clubs, such as Udinese, have operated in asimilar way for many years without sanctions.

To get an idea of underlying profitability and how much cashis generated, football clubs often look at EBITDA (Earnings Before Interest,Depreciation and Amortisation), as this metric strips out player trading andnon-cash items.
In Chelseas case this highlights their recent improvement,as it is has been positive for the last four years, rising from 16 million in2015 to 35 million in 2016, though still lower than the 51 million peak in2014.

However, to place that into context, this is way behindManchester United 192 million, Manchester City 109 million and Arsenal 82million. Uniteds amazing ability to generate cash means that their EBITDA (cashprofit) is more than five times as much as Chelsea and helps explain theBlues focus on player sales.

Chelsea have increased their revenue by 29% (73 million) inthe last three years from 256 million to 329 million. The growth is splitpretty evenly between broadcasting income, which has increased 36% (38million) from 105 million to 143 million, thanks to new TV deals in both thePremier League and the Champions League; and commercial income, which hasnearly gone up by nearly 50% from 80 million to 117 million.
Match day receipts have actually fallen slightly from 71million to 70 million, which underlines why Chelsea are planning to expandtheir stadium.

Although Chelseas 15 million (5%) revenue growth in2015/16 took their revenue to a record level, it was not that good compared totheir major rivals. Admittedly, Manchester Uniteds 120 million (30%) growthwas influenced by their return to the Champions League, but the growth atManchester City 40 million (11%) and Arsenal 21 million (6%) was also higherthan Chelsea.
That said, Chelseas revenue should grow in 2016/17, despitea 60 million reduction from the lack of European competition, as they willbenefit from the new Premier League TV deal including a higher league position(+70 million) plus a new commercial deal with Carabao (+10 million). Thatshould mean a net 20 million increase to around 350 million.
Furthermore, 2017/18 will be boosted by the 30 millionincrement from the Nike kit deal. On the relatively safe assumption that Chelseaqualify for the Champions League, the 2017/18 figures should be close to 450million.

As it stands, Chelseas revenue of 329 million was thefourth highest in England in 2015/16, though nearly 200 million lower than Uniteds515 million. They were also a fair way behind Manchester City 392 million,but quite close to Arsenal 351 million.
Liverpool were within striking distance at 302 million, butthere was a significant gap to the remaining Premier League clubs: TottenhamHotspur 209 million, West Ham 144 million and Leicester City 129 million.

Chelsea remained in eighth place in the Deloitte 2016 MoneyLeague, only behind Manchester United, Real Madrid, Barcelona, Bayern Munich,Manchester City, Paris Saint-Germain and Arsenal. This is obviously excellent,but they face three major challenges here (in common with other English clubs):
The leading clubs continue to grow their revenue apace,e.g. Real Madrid and Barcelona have reportedly agreed massive new kit supplierdeals worth north of 100 million a season.The weakening of the Pound since the Brexit vote meansthat continental clubs will earn much more in Sterling terms, e.g. the latestMoney League was converted at 1.3371, while the current rate has slumped toaround 1.17. At that rate, the 620 million earned by Real Madrid andBarcelona would be equivalent to 530 million, taking them above ManchesterUnited.The Money League highlights the increasingly competitivenature of Englands top flight with no fewer than 12 Premier League clubs inthe top 30 even before the lucrative new TV deal.

Eagle-eyed observers will have noticed that the Money Leaguefigure for Chelseas revenue of 335 million is 6 million higher than the 329million reported by the football club. This is because they have used thefigure from the holding company, Fordstam Limited.
Although this company has not yet published its 2016accounts, the 319.5 million reported in 2015 is exactly the same as the figurein last years Money League. The difference is entirely in commercial income.

If we compare Chelseas revenue to that of the other nineclubs in the Money League top ten, we can immediately see where their largestproblem lies, namely commercial income, where Chelsea are substantially lowerthan their rivals that have traditionally been more successful in monetisingtheir brand: Manchester United 150 million, Bayern Munich 134 million (244million minus 113 million), Real Madrid 80 million and Barcelona 99 million.The 106 million shortfall against PSG is largely due to the French clubsinnovative agreement with the Qatar Tourist Authority.
On the plus side, Chelsea look to be fine on broadcastingand not too bad on match day income, though there is room for improvement inthe latter category.

The growth in broadcasting income in 2015/16 means that thisnow accounts for 43% of Chelseas total revenue, ahead of commercial income35%, which has risen from 26% in 2009. As a consequence, the importance of matchday income has diminished from 36% to only 21% in the same period, once againreiterating the rationale for the planned stadium expansion.
Chelseas share of the Premier League television moneydropped 12 million from 99 million to 87 million in 2015/16, largely due tofinishing tenth compared to winning the title the previous season.Nevertheless, they earned more three clubs finishing above them (Southampton,West Ham and Stoke City), as the smaller merit payment was more than offset byhigher facility fees for having more games broadcast live.

The mega Premier League TV deal in 2016/17 will deliver evenmore money. Based on the contracted 70% increase in the domestic deal and anestimated 40% increase in the overseas deals, the top four clubs will receive150-160 million, while even the bottom club will trouser around 100 million.
Although this is clearly great news for Premier Leagueclubs, it is somewhat of a double-edged sword for the elite, as it makes itmore difficult (or at the very least more expensive) to persuade the mid-tierclubs to sell their talent, thus increasing competition

The other main element of broadcasting revenue is Europeancompetition with Chelsea receiving 69 million for reaching the last 16 in theChampions League, which was 30 million more than reaching the same stage theprevious season, partly influenced by the increase in the 2016 to 2018 cycle,namely higher prize money plus significant growth in the TV (market) pool,thanks to BT Sports paying more than Sky/ITV for live games.
In fact, Chelsea actually earned the sixth highest in theChampions League, more than semi-finalists Bayern Munich, because of how the TV(market) pool works. Each countrys share of the market pool is based on thevalue of the national TV deal, which means that English clubs have prosperedfrom the huge BT Sports deal, though it should be noted that around half ofthis goes into the central pot, so they do not receive the full benefit.

Half of the TV pool then depends on the position that a clubfinished in the previous seasons domestic league: the team finishing firstreceives 40%, the team finishing second 30%, third 20% and fourth 10%. AsChelsea won the title in 2014/15, compared to finishing third the year before,they received a higher percentage in 2015/16 for this element.
The other half of the TV pool depends on a clubs progressin the current seasons Champions League, which is calculated based on thenumber of games played (starting from the group stages). In this way, ManchesterCity reaching the semi-final last season adversely impacted Chelseas share.

Although some have played down the value of Champions Leaguequalification in light of the massive new Premier League TV deal, it is evidentthat it is still financially beneficial.
It has clearly helped Chelsea, who have earned 253 millionfrom Europe in the last five seasons, more than any other English club. It hasthus become a major revenue differentiator against their domestic rivals withChelsea earning substantially more than them in this period: City 32 million,Arsenal 77 million, United 95 million, Liverpool 176 million and Tottenham212 million.

Commercial revenue rose by 8% (9 million) to 117 millionin 2015/16, which was a little disappointing, given that this year included thefirst year of the five-year shirt sponsorship deal with Yokohama Tyres. Theimplication is that some of the commercial deals include success clauses, sothe lower league place and failure to qualify for Europe bit hard.
In fact, since 2014 Chelseas commercial growth of 8million (7%) has been smaller than all their rivals, notably Manchester United79 million (42%) and Arsenal 30 million (39%).

Currently, Chelseas 117 million is less than half ofUniteds astonishing 268 million, 90 million below Manchester Citys 178million and even behind Liverpools 120 million.
However, Chelseas commercial revenue will increase substantiallyin the next couple of years. First, they agreed a three-year deal worth 10million a year with Carabao, a Thai energy drink company, to sponsor trainingwear from 2016/17.
They then signed the largest commercial deal in the clubshistory with Nike, which is worth 60 million a year (15-year deal for 900million), i.e. twice as much as the current Adidas 30 million contract, from2017/18.
"Boy from Brazil"
The Adidas deal was due to run to 2023, so the six yearsfrom 2017 would have brought in 180 million, compared to 360 million fromNike over the same period, meaning a 180 million increase. Although this isreduced to 113 million after considering the 67 million termination fee, it stillrepresents a tidy improvement.
In addition, the Yokohama Tyres shirt sponsorship of 40million a year is worth more than double the 18 million previously paid bySamsung. All in all, these three kit deals will be worth 110 million perannum, which is 62 million more than the previous 48 million.

These deals will leave Chelsea only behind Manchester Unitedfor the main shirt sponsorship and kit supplier deals and its difficult tocompete with their massive agreements with Chevrolet 56 million (at the June2016 USD exchange rate) and Adidas 75 million.
However, the 40 million shirt sponsorship is well ahead ofArsenal Emirates 30 million, Liverpool Standard Chartered 25 million,Manchester City Etihad 20 million and Tottenham Hotspur AIA 16 million.

Similarly, the 60 million Nike kit supplier deal will bemuch better than those signed by Arsenal and Liverpool, respectively 30million (PUMA) and 28 million (Warrior), though these will be up forrenegotiation before Chelsea.
Looking further afield new kit agreements reportedly signedby Barcelona (Nike) and Real Madrid (Adidas) are worth 125 million and 115million respectively (at the current exchange rate), so the bar is continuallybeing raised.

Match day income was 1 million (2%) lower at 70 million,partly due to only staging two domestic cup games, compared to three theprevious season. This revenue stream peaked at 78 million in 2011/12, thanksto the victories in the Champions League and the FA Cup.
Chelseas match day revenue is at least 30 million lowerthan Manchester United and Arsenal, though is still pretty good, consideringthat their grounds are much larger.

This is reflected in the average attendances with Chelseas41,500 miles behind United (75,000) and Arsenal (60,000). It is also lower thanManchester City, Newcastle United, Liverpool and Sunderland.
The reason that Chelseas revenue is higher than clubs withhigher attendances is that they earn a healthy 2.8 million a game, comparedto, say, 2.0 million at Liverpool and 1.8 million at Manchester City. This ispartly due to their ticket prices, which, according to the BBC Price ofFootball survey, are the third highest in England, only surpassed by Arsenaland Tottenham.
That said, Chelsea have again held ticket prices at 2011/12 levels, which means that general admission prices have remained unchanged in nine of the past 11 years. In addition, supporters attending away games in the Premier League over the next three seasons will pay no more than 30 a ticket.

Nevertheless, Chelseas revenue shortfall compared toUnited, Arsenal, Real Madrid and Barcelona helps explain why the club has spentso much time searching nearby locations for a new stadium.
After a couple of false starts, including possible moves toBattersea Power Station, Earls Court and White City, the good news is thatplanning permission has recently been granted by Hammersmith and Fulham boroughcouncil to build a new 60,000 capacity on the Stamford Bridge site.
This will be a complex build with the plan being to dig downto lower the arena into the excavated ground, while the club will also need todemolish Chelsea Village buildings that surround the ground and build walkways overthe two rail lines that flank the stadium.
The assumption is that Abramovich will cover the costs,which have been estimated at 500 million, though it could be much higher, e.g.Tottenhams new stadium will reportedly cost 750 million.
"Hair, he goes, there he goes again"
Chelsea Pitch Owners (CPO) still have to vote on whether togrant Chelsea a longer lease on Stamford Bridge and to give them permission tomove away temporarily while the new stadium is constructed, but it would besurprising if they did not give the green light.
The aim is to have the new stadium ready for the 2021/22season, which would mean Chelsea having to find a temporary home for threeyears. The club is in discussions with the Football Association to play atWembley (as are Tottenham), but nothing has been decided. This would cost up to15 million rent a year, though income might be higher if the crowds increased.
Chelsea have previously highlighted the need to increasestadium revenue to remain competitive with our major rivals, this revenue beingespecially important under FFP rules. In particular, the doubling of corporateseating to 9,000 seats could deliver significant additional revenue with more potentiallycoming from naming rights or other sponsorship opportunities.

Wages rose by 7 million (3%) to 222 million, driven by amassive increase in headcount, up 104 from 681 to 785. Playing staff, managersand coaches increased by 45 to 137, while administration and commercial staffwere 59 higher at 648. The increase would have been even higher if bonuses hadbeen paid at the same level as the league-winning season in 2014/15.
As a technical aside, note that these wage figures have beencorrected when they have included exceptional items, e.g. in 2013/14 thereported staff costs of 190.6 million included a 2.1 million credit for therelease of a provision for compensation for first team management changes, sothe clean wage bill was 192.7 million.

Following the revenue growth, the wages to turnover ratiodropped from 69% to 68%, significantly better than the recent 82% peak in 2010.Interestingly, since the start of the new Premier League TV deal in 2013/14,revenue and wages growth is identical at 29%, implying a degree of control.
Nevertheless, Chelseas wages to turnover ratio is still thehighest of the elite clubs, with the other members of the Sky Six much lower:Manchester United 45%, Manchester City 50%, Tottenham 51%, Arsenal 56% andLiverpool 56%.

That said, Chelsea have been overtaken by Manchester United,whose 232 million wage bill is once again the largest in the top flight.However Chelsea remain a fair bit higher than Manchester City 198 million andArsenal 195 million.
There is then a big gap to the other Premier League clubswith the nearest challengers being Liverpool 166 million, Tottenham 101million (both 2014/15 figures) and Everton 84 million.

This reflects Chelseas stated strategy: In order toattract the talent which will continue to win domestic and European trophiesand therefore drive increases in our revenue streams, the football clubcontinually invests in the playing staff by way of both transfers and wages.
In the last three seasons, Chelseas wages have increased by50 million, which is in line with Manchester United 52 million and Arsenal41 million. The anomaly is Manchester City, whose wage bill declined by 39million in this period, partly due to a group restructure, whereby some staffare now paid by group companies, which then charge the club for servicesprovided.

Although there is a natural focus on wages, other expensesalso account for a considerable part of the budget at leading clubs, thoughthere was an unexplained 11 million reduction at Chelsea in 2015/16 to 71million.
Other expenses exclude wages, depreciation, playeramortisation and exceptional items. They cover the costs of running thestadium, staging home games, supporting commercial partnerships, travel,medical expenses, insurance, retail costs, etc.

This means that Chelsea were also knocked off the top of thisparticular league table, with both Manchester clubs now ahead: United 91million, City 86 million.

Another cost that has had a major impact on Chelseas profitand loss account is player amortisation, reflecting the significant investmentin players. Chelseas initial wave of purchases under Abramovich saw playeramortisation shoot up to 83 million in 2005, before falling away to 38million in 2010 in line with less frenetic transfer activity. As spendingkicked in again, player amortisation has steadily risen back to 71 million in 2016.

The accounting for player trading is horribly technical, butit is important to grasp how it works to really understand a football clubsaccounts. The fundamental point is that when a club purchases a player the transferfee is not fully expensed in the year of purchase, but the cost is written-offevenly over the length of the players contract, e.g. midfield dynamo NGoloKanté was reportedly bought from Leicester City for 32 million on a five-yeardeal, so the annual amortisation in the accounts for him is 6.4 million.
This helps explain why clubs like Chelsea can spend so muchand still meet UEFAs Financial Fair Play targets.

Unsurprisingly, this is one of the highest playeramortisation charges in the Premier League, only surpassed by big spendingManchester City 94 million and Manchester United 88 million.
The value of Chelseas squad on the balance sheet increasedto 241 million in 2016, though this understates how much they would fetch inthe transfer market, not least because homegrown players are ascribed no valuein the books. Chelsea are one of the few clubs to formally acknowledge thisfactor in the accounts, as they have valued the playing staff at a cool 399million.

Chelseas activity in the transfer market is interesting.For the four years up to 2010 Chelseas average annual net spend was just 2million, before rising to 67 million in the four years up to 2014, thenapparently dropping back to 41 million in the last three seasons (excludingthis January transfer window).
However, this is a little misleading, as it is partly aresult of the increased player sales. If we look at gross spend, it tells adifferent story with Chelsea averaging around 100 million a season over thelast seven years. Last summer alone they splashed 119 million on recruitingDavid Luiz, Michy Batshuayi, NGolo Kanté and Marco Alonso.

Even so, their total net spend of 123 million in the lastthree seasons was comfortably beaten by Manchester City 299 million,Manchester United 275 million and (less predictably) Arsenal 165 million,though it was still a fair way above champions Leicester City 84 million.
Chelsea have no financial debt in the football club, as this has all been converted into equity by issuing new shares. That said, the clubs holding company, Fordstam Limited, does have well over 1 billion of debt (1,097 million as of June 2015) in the form of an interest-free loan from the owner, theoretically repayable on 18 months notice.

There were some minimal contingent liabilities of 2.4million, reflecting the fact that Chelsea, unlike most football clubs, pay alltheir transfer fees upfront, which must be an advantage in negotiationscompared to other clubs that have to pay in stages.
Other clubs have to carry the burden of sizeable debt,notably Manchester United who still have 490 million of borrowings even afterall the Glazers various re-financings and Arsenal, whose 233 million debteffectively comprises the mortgage on the Emirates stadium.

The advantage of having a benefactor like Abramovich isdemonstrated by the annual interest payments at those clubs: 20 million forUnited, 13 million for Arsenal. Since 2010 United have paid out more than 400million in financing costs, while Arsenal have paid 275 million in interestand loan repayments in that period. That is money that could have been spent ontransfers or player wages if their owner had acted like Chelseas favouriteRussian.

Although Chelseas cash flow from operating activities hasturned positive in the last four seasons (after adjusting for non-cash flowitems, such as player amortisation and depreciation, plus working capitalmovements), they still require funding from the owner to cover player purchasesand investment in improving facilities at Stamford Bridge and the trainingground at Cobham.
That amounted to 90 million in the last two years: 43million in 2016 and 47 million in 2015. In fact, since Abramovich acquired theclub, he has put around 1 billion into the club, split between 620 million ofnew loans and 350 million of share capital. In that period 685 million ofloans have been converted into share capital, including 12.5 million lastseason.

Most of this funding has been seen on the pitch with 753million (77%) spent on net player recruitment, while another 140 million wenton infrastructure investment. A further 46 million was required to coveroperating losses with 12 million on interest payments, while the cash balancehas increased by 23 million.
Indeed, Chelsea now have healthy cash at bank of 27million, though this is still a lot lower than United 229 million and Arsenal226 million. Its a different approach: Abramovich puts his money into theclub, especially the team, while United and Arsenal have to rely on cashgenerated from their own operating activities though they do leave an awfullot of it in their bank account.

Given Chelseas several years of heavy financial losses,many observers had believed that they would fall foul of FFP, but that has notbeen the case with the accounts confirming that the club was compliant withboth UEFA FFP and Premier League financial regulations.
The club has taken advantage of some of the allowableexclusions for UEFAs break-even analysis, namely youth development,infrastructure and (for the initial monitoring periods) the wages for playerssigned before June 2010.
Even though Chelsea are compliant, it is clear that thislegislation has been at the forefront of the clubs thinking. The accountsstate: FFP provides a significant challenge. The football club needs tobalance success on the field together with the financial imperatives of thisnew regime.
"Points of Authority"
Specifically, Chelsea will need to consider the PremierLeagues Short Term Cost controls, which restrict the annual player wage costincreases to 7 million a year for the three years up to 2018/19 except iffunded by increases in revenue from sources other than Premier Leaguebroadcasting contracts, e.g. gate receipts, commercial income and profits onplayer sales.
Sound familiar? Thats pretty much been Chelseas strategyover the last few years.
It obviously helps if you have an owner with pockets as deepas Abramovich, but that is no longer enough in a football world full offinancial regulations, so Chelsea have had to follow a different path.
It might sound a little strange to say this after Chelsea just announced a70 million loss, but theres no doubt that there are some clever people atStamford Bridge, who have found several ways to grow income and thus meet thedemands of FFP. At the same time, they have managed to put together a squad that is notonly challenging for major honours, but is a good bet to win the Premier League forthe second time in three seasons.Posted byThe Swiss Ramblerat8:13 AM11 comments: Email ThisBlogThis!Share to TwitterShare to FacebookShare to PinterestLabels:Chelsea,England,Football,Roman Abramovich Tuesday, January 24, 2017 Ipswich Town - Stuck In A Moment
This has been a challenging season for Ipswich Town, as theyhave been poor in the league and recently suffered a humiliating, televiseddefeat in the FA Cup against non-league Lincoln City. Manager Mick McCarthyappears to retain the support of the board for the time being, but he has clearlylost many of the fans.
This feels a little harsh on the experienced Yorkshire man,who has arguably enabled Ipswich to punch above their weight during his tenure.When he replaced Paul Jewell in November 2012, Ipswich were bottom of theChampionship, but McCarthy successfully guided the club out of the relegationzone to finish in a comfortable 14th place.
Since then he has registered three successive top tenfinishes. His first full season in 2013/14 ended in a respectable ninth place,before he led them to the play-offs in 2014/15. Last season Ipswich came asomewhat disappointing seventh, but this was still ahead of many wealthierclubs.
As McCarthy pointed out, This is the first year that itsbeen a struggle. To an extent, he has been a victim of his own success, as hereached the play-offs on a shoestring budget, getting the most out of a fairlyaverage squad.
"Merry Christmas, Mr. Lawrence"
This reinforced the cautious approach of Marcus Evans, whohas frequently spoken of his determination to take Ipswich to the PremierLeague since he bought 87.5% of the club in December 2007, but has equallyoften been accused of lacking the ambition to do so.
Evans summarised his philosophy last month: My view, based onthe finances available to us compared to those with parachute budgets and thesmall group with, often short term, huge owner investment, is for the club tomaintain a sustainable and consistent strategy, which I firmly believe providesa foundation each season for a promotion challenge.
He then outlined the key elements of his strategy, Insummary, a focus on the Academy; a competitive wage structure; careful use ofour transfer budget on developing players and a stable management team arefactors which I believe provide us with the best chance of promotion out of theChampionship, which is one of the toughest - and getting even tougher - leaguesin the world.
Managing director Ian Milne was singing from the same songsheet: Marcus has gone for sustainability and Mick understands that. You canachieve good things through getting the right people in your club and workingas a team from top to bottom.
"A Grant don't come for free"
While all this is undoubtedly true, the concern is that thisconservative stance will mean a continuation of the 15-year groundhog dayexistence that Ipswich have held in the Championship (or equivalent) sincerelegation from the top flight in 2002. To paraphrase U2, it feels like Ipswichare stuck in a moment and they cant get out of it.
Initially, Evans provided his managers with enough fundingto be competitive in the transfer market, but this did not achieve the desiredobjective, as first Roy Keane, then Jewell essentially wasted the owners cashwith a series of poor choices. Not only did these expensive purchases notdeliver on the pitch, but they ended up being offloaded for peanuts, leading tolarge financial losses arising from misplaced recruitment.
Having had his fingers burnt, Evans opted for a change instrategy: I wanted to work with a manager who was going to try to and coachand make our players better, rather than give the manager the opportunity (tosimply buy players).
"Don't Luke back in anger"
The owner explained: You would have hoped that money hadresulted in better things, but look at Nottingham Forest they lost 25million last year and got nowhere. There are a lot of clubs out there thatspent a lot more than Ipswich did and who ended up in exactly the samesituation.
The drive to more sensible cost management was alsoinfluenced by the introduction of the Financial Fair Play rules, whichessentially aim to force clubs to live within their means.
As a result, in the past few years Ipswich have focused onfree transfers, loans and swap deals, while trying to bring through youngplayers from the Academy into the first team. As Milne explained, We do have avery good scouting network and that enables us to get players at the minimumtransfer fee.

Consequently, Ipswich have averaged annual gross spend ofonly 0.5 million in the last four seasons (though the January 2017 transferwindow has not yet closed), compared to 5.6 million a season in the firstthree years of the Evans era. In the same periods, average net spend of 4million has flipped to average net sales of 4 million, an 8 million reduction.
Last summers spending was a good example of Ipswichspolicy: two promising young players were acquired in the shape of Grant Wardfrom Tottenham Hotspur and Adam Webster from Portsmouth at a combined cost of1.4 million, while there were a couple of free transfers, including theveteran journeyman Leon Best from Rotherham United.
Evans argued that there was also money splashed out on loanfees and wages needed to tempt Premier League clubs to release players,including Welsh internationals Tom Lawrence (from Leicester City) and JonnyWilliams (from Crystal Palace) and Conor Grant (from Everton), but Ipswichsupporters would justifiably point out that the club failed to replace forwardDaryl Murphy, who was sold to Newcastle United.

Ipswichs parsimony can be seen by looking at the grossspend of Championship clubs this season, when only six clubs spent less thanthe Tractor Boys. These included two clubs with transfer embargoes (BlackburnRovers and Nottingham Forest) plus a few minnows, i.e. Preston North End,Burton Albion, Rotherham United and Wigan Athletic.
The more meaningful comparison is with clubs seekingpromotion, as Evans himself noted, Newcastle and Norwich spent more than 100million between them on transfer fees in the August window as they chase animmediate return to the Premier League. Although this was actually factuallyincorrect, his point was still valid as Newcastle and Aston Villa have spent55 million and 52 million respectively. Other big spenders include Fulham 22million, Derby County 14 million, Wolverhampton Wanderers 11 million andBristol City 11 million.
Many managers would use this low spending as an excuse fornot meeting their objectives, but McCarthy is made of sterner stuff, sayingthat he wont stamp his feet over the restricted transfer budget given to himby Evans. Instead, he sees it as his job to get more out of the players hesgot.
That said, he would like his achievements to be recognised:Ive done a bloody good job under the terms and conditions. Ive sold Murphy,Ive sold Mings, and others, and weve stayed competitive.

Despite this prudent policy, Ipswich reported a 6.6 millionloss in 2015/16, a 12.1 million deterioration from the previous years 5.5million profit, though this was almost entirely due to a 11.5 millionreduction in profits on player sales. These dropped from 12.2 million in2014/15, due to the sales of Tyrone Mings to Bournemouth and Aaron Creswell toWest Ham, to only 0.6 million.
The wage bill rose by 0.6 million (4%) from 16.0 millionto 16.6 million as further funds were invested in the squad to challenge forthe play-off positions. Other expenses also increased by 0.3 million (6%) to5.4 million, but player amortisation dropped by 0.5 million (74%) to just0.2 million.
Revenue slightly decreased by 0.1 million (1%), mainly dueto a 0.4 million (9%) reduction in commercial income to 4.4 million, offsetby broadcasting income rising by 0.3 million (6%) to 5.4 million. Gatereceipts were unchanged at 6.5 million, as the clubs share of receipts fromthe League Cup tie against Manchester United at Old Trafford compensated for afall in attendances and the money from the previous seasons play-offappearance.

Although a 7 million loss might not sound overly impressive, it has to be assessed inthe context of Englands second tier, where the harsh reality is that mostclubs are loss-making, largely as a result of their natural desire to reach thelucrative Premier League.
In this way, none of the Championship clubs that have so farpublished their 2015/16 accounts has been profitable with some reporting heftylosses: Brighton and Hove Albion 26 million, Hull City 21 million, Reading15 million and Bristol City 15 million. As Evans lamented, Wouldnt it benice if you could turn a profit in the Championship, but Im afraid thats notthe case.

One way a football club can compensate for operating lossesis via player sales, but Championship clubs have struggled to make big moneysales with the highest amount reported so far last season being Hull Citys 13million and they had Premier League players to offload following relegationin 2015.
However, Ipswichs profit on player sales of 0.6 millionwas one of the lowest in the division in contrast to 2014/15 when their 12.1million profit was only surpassed by Norwich Citys 14 million. Of course, nextyears accounts will be boosted by the 3 million sale of Daryl Murphy toNewcastle.

Ipswich have only reported a profit once in the Evans era,the 5 million in 2014/15, losing money in the other eight years. However, itis noticeable that the losses have been reducing, effectively capped at 7million in the past three seasons.
As Milne explained, In 2012 the annual losses peaked at 16million and we started to go down a slightly different route. That wasactually the third worst loss in the Championship that year and served as amajor wake-up call.
The reason for this large deficit were given by financedirector Mark Andrews, We brought in some experienced players in the 2011/12season, Paul Jewells first season in charge, which kept the playing squadcosts high.

However, Ipswichs best results in recent times have beenboosted by large profits on player sales, as seen in 2014/15. Without the salesof Mings and Cresswell, the reported profit of 5.5 million would have been aloss of 6.7 million, i.e. in line with the 7 million losses in 2013/14 and2015/16.
It was a similar story in 2011/12 when this activity contributed10.8 million, largely due to the transfers of Connor Wickham to Sunderland for8 million and Jon Walters to Stoke City for 2.75 million. Without thesesales, Ipswich would have registered another big loss of 14 million.
The owner has said that his funding would eventually beunsustainable without the benefits of transfer revenues from time to time tooffset the clubs running costs. Interestingly, the club has made more moneyfrom cheap, young players rather than experienced professionals. This was acknowledgedby Evans: We lost some good players in the past who were out of contract,i.e. could leave for very little or even nothing.

To get an idea of underlying profitability and how much cashis generated, football clubs often look at EBITDA (Earnings Before Interest,Depreciation and Amortisation), as this metric strips out player trading andnon-cash items. In Ipswichs case this highlights the changed strategy after2012, as EBITDA has improved from minus9 million in 2012 to minus 6 million in 2016 (though this was a million worsethan the previous year).

This might not sound overly impressive, as it is stillnegative, but it has to be put into the context of the Championship, where veryfew clubs manage to generate cash. Apart from Blackpool with their uniqueapproach to running a football club, no Championship has reported EBITDA higherthan 1.5 million in the last two seasons (in stark contrast to the PremierLeague where in the same period every club enjoyed positive EBITDA, except the basketcase that is QPR).

Revenue has fallen by 1 million (6%) from the recent 17.2million peak in 2011, which was boosted by reaching the Carling Cup thesemi-final and a profitable FA Cup match at Chelsea.
All revenue streams have fallen since then, especiallycommercial income, which is 13% (0.7 million) lower, though this is partly dueto a decision to outsource catering (and thus only including net royaltypayments in revenue). Gate receipts have rebounded, even though attendanceshave fallen, partly due to ticket price increases.

Following the slight reduction in 2015/16, Ipswichs revenueof 16 million remains firmly in the bottom half of the Championship, a longway behind the top three clubs, who all earned more than 40 million. Ofcourse, to a large extent, this only demonstrates the importance of parachutepayments for those clubs relegated from the Premier League.
This is clearly a sore point for Evans, The averageparachute club starts with a 20 million per season head start over the rest ofus. He added, The lack of parity in the game certainly makes it harder tocompete. This season there were nine clubs benefiting from parachute paymentsand there will be something similar next year. That gives them a massivefinancial advantage.

If these parachute payments were to be excluded, the gapwould obviously reduce, but Ipswichs 16 million would still be a fair waybehind many other clubs, e.g. Brighton 25 million, Leeds United 24 millionand Derby County 21 million. Given these stats, Ipswichs performance in thelast three seasons is worthy of some praise.

The mix of Ipswichs revenue has changed over the years withbroadcasting rising from 13% in 2009 to 33% in 2016 and commercial falling from41% to 27%. However, match day remains the most important revenue stream at40%, even though it has declined from 46%.

Unsurprisingly, this means that Ipswich are one of theChampionship clubs most reliant on gate receipts. In percentage terms only fourclubs had a higher dependency in 2014/15: Nottingham Forest, Charlton Athletic,Brighton and Millwall.

Gate receipts were flat at 6.5 million in 2015/16, eventhough average attendance fell by 644 (3%), as this was offset by oneadditional home cup game. Nevertheless, Ipswichs match day revenue is the 9thhighest in the Championship, though still around 3 million lower than Brighton9.4 million and Leeds United 9.2 million.
Ipswichs average attendance of 18,959 was actually the 8thbest in last seasons Championship, but a fair way behind clubs like DerbyCounty (29,663), Brighton (25,583) and Middlesbrough (24,627).

Ipswichs attendances had been on a declining trend for anumber of years, but the charge to the play-offs resulted in an upswing in2014/15. However, they have started to fall again since then with a furtherslump this season to 16,789, which means that Ipswich have lost a third oftheir crowd since the recent 25,651 peak in 2004/05.
Evans is acutely aware of the reduction in spectators: Wecant deny that attendances have been falling away somewhat this season anindication of the disappointing results we have had this year.

He said that the club was looking at creative ways ofgetting supporters back to Portman Road. These include low prices foryoungsters (e.g. the season ticket for under-11s has been held at just 10 fornine successive years), interest-free direct debit monthly payment scheme anddiscounts with local businesses. If Ipswich are promoted to the Premier League,the season ticket will be upgraded at no extra price plus the holder will begiven a free season ticket.
However, fundamentally Ipswichs ticket prices are among themost expensive in the second tier. According to the BBCs Price of Footballsurvey, no other fans in the Championship pay more for the most expensiveseason ticket, while Towns prices for the cheapest season ticket are onlysurpassed by three clubs (Brighton, Newcastle and Norwich City).
From 2003 to 2013 season ticket prices had remained frozenfor seven out of the 11 years. However, prices have gone up every year since 2014/15,including a 1.5% increase for the 2017/18 season (in line with the retail priceindex).

Ipswichs broadcasting revenue rose 6% (0.3 million) to5.4 million in 2015/16, which was attributed to an increase in the FootballLeague basic distribution. In the Championship most clubs receive the sameannual sum for TV, regardless of where they finish in the league, amounting toaround 4 million of central distributions: 2.1 million from the Football Leaguepool and a 2.3 million solidarity payment from the Premier League. There arealso payments for each live TV game: 100,000 home; 10,000 away.
However, the clear importance of parachute payments is onceagain highlighted in this revenue stream, greatly influencing the top nineearners in 2014/15. Nevertheless, it should be noted that these payments arenot necessarily a panacea, e.g. Middlesbrough secured promotion last season,even though their broadcasting income of 6 million was less than half the sizeof those clubs boosted by parachutes.

Looking at the television distributions in the top flight,the massive financial chasm between Englands top two leagues becomes evidentwith Premier League clubs receiving between 67 million and 101 million in 2015/16,compared to the 4 million in the Championship. In other words, it would take aChampionship club more than 15 years to earn the same amount as the bottomplaced club in the Premier League.
The size of the prize goes a long way towards explaining theloss-making behaviour of many Championship clubs. This is even more the casewith the new TV deal that started in 2016/17, which will be worth an additional35-60 million a year to each club depending on where they finish in the table.

Even if a club were to finish last in their first season inthe top flight and go straight back down, their TV revenue would increase by anamazing 95 million. They would also receive a further 71 million in parachutepayments, giving additional funds of around 166 million. If they survivedanother season, you could throw in another 120 million.
Of course, if they did go up, Ipswich would also have tospend more to strengthen their playing squad, but the net impact on the clubsfinances would undoubtedly be positive, as evidenced by the improvement in thebottom line for those clubs promoted in the past few seasons.

As we have seen, parachute payments make a significantdifference to a clubs revenue and therefore its spending power in theChampionship. From this season, these will be even higher, though clubs willonly receive parachute payments for three seasons after relegation. My estimateis 83 million, based on the percentages advised by the Premier League (year 1 55%, year 2 45% and year 3 20%), including around 40 million in thefirst year. However, if a club is relegated after only one season in thePremier League, it will only benefit from parachute payments for two years.
There are some arguments in favour of these payments, namelythat it encourages clubs promoted to the Premier League to invest to compete,safe in the knowledge that if the worst happens and they do end up relegated atthe end of the season, then there is a safety net. However, they do undoubtedlycreate a significant revenue disadvantage in the Championship for clubs likeIpswich, as Evans has often stated.
It is worth noting that if Ipswich were to be promoted, thenthey are contractually bound to make additional payments to players, coaches,staff, players former clubs, season ticket holders and certain convertibleloan note holders. This is not quantified in the latest accounts, but was givenas 8.2 million in 2013.

Commercial income fell by 4% (0.4 million) to 4.4 millionin 2015/16, though this is a little misleading, as the match day publiccatering operation was outsourced whereby the club now receives a royalty basedon turnover.
Corporate sales and sponsorship were also slightly down onlast year, however merchandise sales exceeded 2014/15, further building on thesuccess of the change of kit supplier to Adidas in 2014 (a four-year deal).This was the first time Ipswich had worked with the German supplier since theglory days 35 years ago when they won the FA Cup and UEFA Cup under BobbyRobson.
The shirt sponsorship is with the Marcus Evans Group, whooriginally signed a five-year deal in 2008 worth a reported 4 million in totaland have subsequently extended this each season.
There is clearly room for improvement in the commercial area,though to be fair only two Championship clubs (QPR and Leeds United) generatemore than 10 million a season. This is basically down to results, as Evansadmitted: We work very hard maximising revenues for the club on a commercialbasis, but ultimately our product is about what the team delivers on the pitch.And, like any business, if your product is of good quality, youll make moremoney and sell more of your product.

Ipswichs wage bill increased by 4% (0.6 million) to 16.6million, as full-time headcount was up from 142 to 149, leading to the wages toturnover ratio rising from 97% to 102%.
This was the second year in a row that wages have climbed, anecessary evil for Town, as explained by Ian Milne when commenting on the2014/15 figures: The wage bill has gone up this season quite appreciably. Peoplesay where has the Tyrone Mings and Aaron Cresswell money gone? Well thatswhere it is being ploughed into.
Nevertheless, wages are still 8% below the 18.0 millionpeak in 2012, when the wages to turnover ratio was as high as 119%. Milneagain: Were not paying under the market value, but the important thing isthat were not paying over the market value either which is something we havedone in the past. Back in 2012 (when the club made a loss of 16m) we werepaying some very high salaries.

Clearly, the business model is still not ideal if revenue isnot sufficient to cover the wage bill, let alone any other expenses, but almostevery club in the Championship has a dreadful wages to turnover ratio with overhalf of them being more than 100%. In fact, Ipswichs 102% looks positivelyreasonable compared to clubs like Brentford 178%, Nottingham Forest 170% andBlackburn Rovers 134%.
The 17 million wage bill was also firmly in the bottom halfof the league, underlining the challenge in reaching the play-offs. Inparticular, it was significantly lower than the likes of Cardiff City, Fulham, Reading,Hull City, Blackburn Rovers and Nottingham Forest, whose wages were all above30 million. This season it will be even worse with the arrival of big spendingNewcastle United and Aston Villa in the Championship.

As Milne observed, We certainly arent the highest spendersin terms of wages. We are paying more than we were, but I suspect it is stillquite a bit less than some of the clubs that surround us.
Of course, a high wage bill is no guarantee of success andit is also true that clubs have been promoted with a low wage bill, e.g.Burnley, but Ipswichs relatively low wages certainly do not make it anyeasier.

Other expenses rose by 0.3 million (6%) to 5.4 million in2015/16, largely as a result of a restatement of the Football League pensionfund deficit (in accordance with Financial Reporting Standard FRS102) andgeneral cost increases, but this was still on the low side, compared to clubslike Brighton 16.0 million, Fulham 13.4 million and Leeds United 12.6million.

The recent lack of spending in the transfer market has beenreflected in Ipswichs profit and loss account via player amortisation, whichhas fallen from 5.1 million in 2009/10 to just 0.2 million in 2015/16.
In the same way, the lack of big money buys from other clubshas impacted the balance sheet with the value of player (intangible) assetsdecreasing from 6.4 million in 2010 to 0.3 million in 2016.

The accounting for player trading is fairly technical, butit is important to grasp how it works to really understand a football clubsaccounts. The fundamental point is that when a club purchases a player thetransfer fee is not fully expensed in the year of purchase, but the cost iswritten-off evenly over the length of the players contract, e.g. Grant Wardwas bought from Tottenham for a reported 600,00 on a three-year deal, so theannual amortisation in the accounts for him is 200,000.

To place this into perspective, Ipswichs playeramortisation of 0.2 million is one of the lowest in the Championship, onlyahead of Rotherham United. The highest player amortisation is obviously foundat clubs recently relegated from the Premier League, namely Hull City 21million, QPR 16 million, Cardiff City 11 million and Fulham 11 million.

Net debt fell by 0.7 million from 87.2 million to 86.5million, as gross debt was reduced by 1.6 million from 88.2 million to 86.6million, but cash also dropped by 0.9 million from 1.0 million to 0.1million. Nevertheless, debt has shot up from the 36 million in 2008, which waslargely taken on by Evans when he bought the club.
Almost all the debt is owed to various Marcus Evanscompanies, mainly through a mixture of loans and convertible loan notes. Thereare also 8 million of preference shares, which pay a fixed dividend of 7% perannum (provided there are profits available for distribution). To date, theclub has accrued 4.8 million for these dividends. Against that, interest hasnot been charged on the Loan Notes 2026 from July 2014.
Of course, many clubs in the Championship have built up substantialdebt, but Ipswichs 87 million is only surpassed by five other clubs: QPR 194million, Brighton 171 million, Cardiff City 116 million, Blackburn Rovers104 million and Hull City 101 million.

The club has emphasised that it is not in debt to anyfinancial institution, as explained by finance director Mark Andrews, ''MostChampionship clubs are carrying debt but the majority of debt carried atIpswich Town is not external, it is owed to the Marcus Evans Group.
Milne added, Marcus is very happy with the debt level its all owed to him, none of it is owed to banks or anything like that. He,like a number of owners, doesnt expect to get any of it back unless we get inthe Premier League.
This is indeed true, but there is still a degree of riskassociated with such an arrangement, as the annual accounts noted: the clubremains dependent upon ongoing financial support from its principalshareholder.

From a cash perspective Ipswich basically balance the books,but only because Evans increases his loan each year, as the cash flow fromoperating activities remains stubbornly negative. In the last decade Evans hasprovided 46.3 million via 32.8 million of loans and a 13.5 million increasein share capital. Financing has also come from 7.4 million of net player salesand a 1.5 million reduction in the cash balance.
However, the lack of investment over the last eight years isstriking with just 0.2 million being spent on infrastructure improvements inthe Evans era, i.e. virtually nothing on the stadium. Instead, almost all ofthe funding has been used to simply cover the clubs operating losses.

Former chief executive Simon Clegg explained Ipswichsdependency on the owner a few years ago, We only survive because Marcus Evanscan afford to put in 4 million or 5 million of his own money every year tokeep the club afloat, while Evans repeated the mantra last December, I amcommitting sums of 5 million and more per annum, at the start of each seasontowards the annual budget.
That was certainly true in the past, but the cash flowstatement shows that only around 400,000 of additional loans were received bythe club in each of the last two seasons (net 250,000 after loan repayments),as the difference was largely compensated by player sales.
That may have changed this season, but Milne noted in aslightly worrying statement that, You cant keep expecting the owner to keepthrowing money at things.

Either way, Ipswichs cash balance as at 30 June 2016 wasdown to just 91,000, one of the lowest in the Championship, though in fairnessnone of the clubs is sitting on a cash mountain.
One accusation against Evans ownership is that there hasbeen a lack of transparency around the clubs affairs, epitomised by HMRCissuing a winding-up order in February 2016 for non-payment of tax, though thiswas subsequently dismissed and described by Milne as a storm in a tea cup.
Yet the main charge is that the owner lacks ambition. Theman himself has argued that this is not the case, effectively laying the blameat the feet of Lady Luck: When I took over here I was hoping we would get tothe Premier League in five years. I never had a firm expectation though. Irealised that in football there are so many factors outside of your control.
In fairness, Evans cautious approach has to be consideredpreferable to that applied by some owners (Bolton Wanderers, for example),especially for a club like Ipswich Town that experienced administration in thenot too distant past.
"Hard to Berra"
In any case, he cannot simply buy success, as Ipswich needto comply with the Financial Fair Play (FFP) regulations. Evans had been a keensupporter of this initiative, It is a key objective of the Board to reduceongoing losses in order to meet the Football Leagues FFP rules.
However, he has become increasingly disillusioned, FFP,which was brought in to level an increasingly uneven playing field hasntworked. This is not just due to the advantage that parachute payments bring toclubs facing a cap on losses, but the application of the regulations.
Evans again, At the moment it appears to be a total farce.However, lets wait and see if the Football League does its job. I appreciatethat legal wheels sometimes grind very slowly.
Under the new rules, losses will be calculated over arolling three-year period up to a maximum of 39 million, i.e. an annualaverage of 13 million, assuming that any losses in excess of 5 million arecovered by owners injecting equity. A higher loss one year can be compensatedin later years, e.g. via player sales, or might even become irrelevant (if theclub is promoted).
"No Tears for Sears"
Basically, the allowable losses have increased, which islikely to encourage Ipswichs rivals to spend even more, making the divisioneven more competitive. For Ipswich to challenge, Evans would have to injectequity to maximise allowable losses.
It should be noted that FFP losses are not the same as thepublished accounts, as clubs are permitted to exclude some costs, such asdepreciation, youth development, community schemes and any promotion-relatedbonuses.
These barriers help explain Ipswichs focus on youthdevelopment, as explained by Evans: I am 100% committed to the Academy andhave recently invested over 1 million in new infrastructure and additionalstaffing. I believe our efforts of the last years are starting to pay off.
Despite failing to secure the coveted Category One status, anumber of talented players have emerged from the Academy over the last coupleof years, e.g. Andre Dozzell, Teddy Bishop, Josh Emmanuel and Myles Kenlock.Furthermore, Town had three players in the England squad at last summers U17European Championship.
"Teddy Picker"
Evans recently underlined his commitment, to Ipswich Town Iwill continue to do everything I can to ensure that the success we want is justaround the corner and that we are promoted. However, he put his finger on themain issue in the very same statement, There are those that feel my investmentplan has no chance of success.
This is a reference to the feeling that it is unlikely thata club like Ipswich could be promoted to the Premier League without the benefitof substantial investment, particularly in a world of ever more lucrativeparachute payments to clubs relegated from the top flight.
It would indeed be a major surprise if Ipswich were to goup, especially given their current lowly position. Stranger things havehappened, but not too often.Posted byThe Swiss Ramblerat7:28 AM13 comments: Email ThisBlogThis!Share to TwitterShare to FacebookShare to PinterestLabels:England,Football,Ipswich Town,Marcus Evans Older PostsHomeSubscribe to:Posts (Atom)The Swiss RamblerUsually writes about the business of football.
Occasionally I share my thoughts on music, books, films, television, podcasts and other stuff.About MeThe Swiss RamblerA Brit who has been living in Switzerland for many years, having found (and married) a Swiss Miss. During his globetrotting career in the world of finance, he has also lived in Italy and Sweden.View my complete profileClick to contact me:
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