Leicester’s accounts explained: Why an £89.7million loss contributed to Premier League PSR charge


Leicester City may feel the effects of their surprising relegation from the Premier League “for some time”.

Chief executive Susan Whelan delivered that ominous warning in a press release announcing the club had filed a pre-tax loss of £89.7million ($113m) in their latest set of accounts on the back of a record £92.5million loss the season before.

In fact, Leicester have gone from a four-year run of making a profit, including the £92million they made in 2017 thanks to £70million from their Champions League run, to now making a loss over five consecutive years.

In the accounts, which cover the disastrous 2022-23 season in which Leicester went from an eighth-placed finish the previous year to finishing 18th and losing their Premier League status after nine seasons, the club admits it may have breached profit and sustainability rules, but believes there should be mitigation considered because of how unexpected and unique their rapid decline was. Before relegation, they had won the Premier League, the FA Cup and competed in three European campaigns.

Turnover fell for the second straight year and, this time, it plunged, going from £214.6m to £177.3m. The big factor was the absence of any UEFA money (they made £25.6m in 2021-22 for their run to the semi-finals of the Conference League) and the fall down the Premier League, which they estimate cost them £15.3million, although that figure could be higher in reality.

The club’s costs rose massively, from £216m to £301.8m, partly due to the extra month in the 2022-23 accounting period, which was increased to 13 months to bring them in line with other top-flight clubs, who typically end their financial years in June. This effectively gave Leicester an extra month to make sales, but the issues are more to do with the club continuing to spend a lot on their team in terms of wages and amortisation.

The wage bill climbed from £182m to £205.8m. That means the club’s wage-to-turnover ratio, which is a key indicator of sustainability, hit a massive 116 per cent. They were spending £1.16 for every £1 that came in.

This increase follows a wages-to-turnover ratio of 85 per cent in 2020-21 and 2021-22, which is 15 per cent more than the 70 per cent squad costs rule set by UEFA.

The wage bill in 2021-22 was the seventh-highest in the Premier League, as was their wages-plus-amortisation cost, in line with the club’s stated aim to be the best of the rest. This meant Leicester were always going to be vulnerable to a performance-related fall in income because the club’s commercial and matchday revenue streams are actually mid-table.

Whelan insists the club’s high wage bill and budget were “entirely reasonable”, but it was these costs, coupled with the loss of Premier League merit money and the cost of removing manager Brendan Rodgers, who they had made the highest-paid manager in the club’s history, and his staff before the end of the campaign that have been the major contributing factors. Rodgers still had over two years of his contract remaining when he left and was reportedly paid £8million per year.

“Having achieved finishing positions in the Premier League of fifth, fifth and eighth in the three preceding seasons, our targets and associated budgets for 2022-23 were entirely reasonable,” she says.

“However, for a club such as ours, whose sustained sporting achievements have justified the levels of investment required to compete with the most established clubs and pursue our ambition, a season of such significant under-performance on the pitch presents financial challenges, particularly from the perspective of the game’s current profit and sustainability rules.”

Brendan Rodgers, Leicester


Leicester parted ways with Brendan Rodgers on April 2, 2023 (Ryan Pierse/Getty Images)

Leicester even made a transfer profit of £74.8million on the sales of Wesley Fofana to Chelsea and James Maddison to Tottenham Hotspur. Extending their accountancy period allowed the Maddison deal to be included in the accounts. During the same period, Leicester signed Wout Faes, Harry Souttar and Victor Kristiansen for a total outlay of £45m.

Leicester have previously been very good at selling players. According to the football finance blog Swiss Ramble, only Chelsea and Liverpool made more money than Leicester from player trading between 2017 and 2021.

The club appeared to follow a strategy of one big sale a year to try to balance the books — until 2021-22 when they didn’t sell an asset. They only made £9m on trading that season but have returned to the model again in these accounts, with two high-profile players sold. More are likely to have to depart at the end of this season.

However, Fofana and Maddison’s sales have not been enough to avoid a possible sanction from the Premier League, who have referred the club to an independent commission. If found to be in breach and by how much, which could prove to be by quite a lot, Leicester are expected to face a points deduction, most likely next season regardless of what division they are in.

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The English Football League have also enforced a registration embargo on Leicester this season for what they believe will be a potential breach of their PSR, which limits clubs to just £13million of losses per season rather than the £35million allowed in the Premier League. A total loss of £105million over a three-year cycle was allowed under Premier League rules, which will be reduced to £83million for the next accounts.

Under the embargo, they cannot register any new signings and may not be able to offer new contracts to existing players like Jamie Vardy, Wilfred Ndidi, Kelechi Iheanacho and Jannik Vestergaard when their current contracts expire at the end of June.

Interestingly, in the 2022-23 accounts, the club stressed they believed they were under the jurisdiction of the Premier League for this set of accounts and will only be under EFL jurisdiction for their next accounts.

“The club is determined to ensure that any charges against it are properly and proportionately resolved, in accordance with the applicable rules, by the right bodies and at the right time,” the club, who last month said they had launched legal proceedings against both the Premier League and the EFL, said in a statement.

Commercial revenues did increase, with gate receipts up £1.4m, sponsorship revenue up £1.3m and commercial turnover up by £1m. The extra month should be factored in, but the club’s headcount also rose by about six per cent from 467 to 495 and there was also a one-off fine of £880,000 from the Competitions and Markets Authority for overcharging fans for their merchandise.

Having averaged a top-eight finish over their previous eight seasons in the Premier League, Leicester had budgeted for a similar finish and while they hadn’t budgeted to include prize money for competing in UEFA competition, which had been included in the previous two accounts, that was still the stated goal in the club’s previous account statements and they increased their playing budget to try to retain the competitiveness of their squad.

James Maddison, Tottenham Hotspur


Leicester sold James Maddison to Tottenham in June 2023 (Mike Hewitt/Getty Images)

While Leicester were pushing close to their limits to compete with clubs with vastly higher turnovers, player trading was their safety net, but even with two big player sales, it still wasn’t enough to bridge the losses.

What is made clear by these accounts is how reliant the club is on the owners, the Srivaddhanaprabha family and King Power International. A debt to KPI totalling £194million was turned into equity. Not only did this tidy up the balance sheet, but it also saved them more than £6m in interest, with their annual interest bill falling from £18.9m to £12.5m.

In his matchday magazine notes before Monday’s victory over Norwich City, chairman Aiyawatt Srivaddhanaprabha, known as Khun Top, stressed his and the company’s commitment to the club in an attempt to reassure concerned fans.

Leicester still have a loan facility with KPI they can draw upon, while they are close to paying off an £80million loan facility with Australian bank Macquarie, having also settled a £40million credit agreement.

“The long-term and ongoing financial security and commitment provided by Khun Aiyawatt, the Srivaddhanaprabha family and King Power International, enables the club to rebuild with certainty and confidence,” says Whelan, who took a pay cut from £327,000 to £301,000.

PSR does not factor in investment in the academy, women’s team and the club’s infrastructure, with plans still in place to develop land adjacent to King Power Stadium and to increase the capacity of the East Stand.

The club has also been investing in environmental work at King Power Stadium and their Seagrave training ground, including bee hives, log hotels and electric vehicle charging points to reduce the operation’s carbon footprint.

None of this is likely to have any bearing on Leicester’s mitigation before the PSR commission. Neither will their hope that they didn’t expect the 2022-23 season to happen, or to have to sack Rodgers. The commission is likely to look at the raw figures and conclude that, for too long now, Leicester have been spending more than their income to compete with the elite of the Premier League and with the seventh-highest wage bill in the division, they fell further than any club before.

“Leicester’s accounts reveal a total loss of control of costs, especially wages,” says Kieran Maguire, who teaches football finance at Liverpool University. “They have certainly breached the Premier League’s upper threshold for allowed losses for the period to the end of June 2023 and they are in grave danger of doing an Everton and breaching again for the current season, particularly as they can only lose £83million for that period.”

Leicester had lofty ambitions and didn’t believe a season as terrible as 2022-23 could happen.

Now it is a question of how they recover. As Whelan states, it could take some time for Leicester to get to where they were before.

(Top photo: Nathan Stirk/Getty Images)





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