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Financial Statements Analysis (2023)
at 05:52 21 Feb 2024

I'm an Accountant, which is rarely useful but for once it is, so thought I'd share some thoughts on the latest set of Financials, which you can find at Companies House (I’m not sure if I’m allowed to post a link so I won’t). I’m no expert on sport accountancy rules or FFP so please correct me if you can see anything wrong….

Training Ground:

Total cost capitalised was £19.2m, this is the working in progress cost to 31.05.2023, the separate capital commitments note (25) states that a further £2.5m is required. Technically capital commitments are only what the company ‘must’ pay so the additional cost may be higher than this, but it’s probably a reasonable estimate. In the prior year they estimated a cost of £9m and they spent £12m. It would have been significantly harder to estimate in February 2022 as it was early in the project. These amounts seem within tolerances so we can accept the £2.5m as likely accurate. This brings the total cost of the training ground to £21.7m.

I suspect that there are P&L operating costs for this project which have not been capitalised. These may be allowable deductions for the FFP/P&S calculations. It’s not possible to see this as there is no detailed P&L but worth bearing in mind when you get to the last section.

How was the training ground funded:

About a third, £6.8m, came from the bond available to supporters. Lee Hoos at the time said it was cheaper than the open market and at 5% plus 3% ‘store’ credit that seems fair. The incremental cost to QPR of the 3% is likely <1% (empty seats being filled cost almost nothing) and the mark up in the club shop is likely 300% or so; £30 spent there probably only has a real £10 cost to QPR.

We can see £10m came from a loan (note 15 convertible bond) from Ruben via his wife. This is 6% so is in line with what the supporters are getting above, that is reassuring to see. A convertible bond means it can be transferred into equity rather than being paid back in cash. I assume this was agreed with the other shareholders as it would dilute the ownership of everyone else if new shares were issued.

The remaining balance it seems will come from the Directors in line with their shareholdings as it will be a cash injection, in exchange for a Directors’ loan, which will likely then be converted into equity. As it’s all in line this won’t cause a change to the shareholders equity percentages.

Shareholders:

Note 24, post balance sheet events is the most up to date information in the financial statements. It shows that after Tony left, and sold his 25% stake, the shareholdings became (rounded):

60% Ruben
21% Richard Reily
19% Amit

It is hard to estimate what would happen if the convertible bond above is settled in shares, as it is likely part of the individual loan agreement. Valuing QPR as an asset is a fools errand. The business is basically insolvent, as most football clubs are, so who knows what was agreed. I would hazard a guess it would be c.5-10%. This would concentrate ownership with Ruben but likely not breach the important 75% threshold where Ruben would have extra powers of control. Even if that were the case that he went over 75%, I would suspect the individual shareholder’s agreements, signed when the initial investments were made, would prohibit him for exercising a lot of these powers.

Rob Dickie, Seny Dieng and the summer 2023:

It seems (note 24) QPR made a small profit (£1.8m) in the Summer of 2023 with the sale of Dieng and Dickie, this more than covered the termination agreements of Johanson and Hamalainen plus the acquisitions of Smith, Begovic, Colback, Cook, Fox and fan’s favourite Taylor Richards.

Player registrations:

Having listened to many a podcast on QPR a lot has been, rightly, made of the decision to bring in Cook, Fox, Colback on longer contracts. The issue of course being if they fall off a cliff in performance, especially if it’s age related we will be carrying their wages and it squeezes the FFP headroom for any new players to cover their positions in future years. All true, but the on-going amortisation cost of transfers often has a bigger impact than the in year salaries of playing staff. Here at least the Accounts seem to give us some good news.

Note 9 shows the player registration net value. QPR had on their books at June 2022 £8.4m, this is cash spent but will go into the FFP calculation in future. Within the year to May 2023 £6.1m of that was removed, either written off at the point of exit of a player, or just reduced as time passes (I assume the Useful Economic Life of a player’s registration is matched to the length of his contract). The carried forward value (amounts to be amortised after 1st June 2023) stands at £2.2m. The note says the average length of remaining carrying period is 11 months so it fair to assume that the majority of that £2.2m will be used up in the financial year June 2023 to May 2024.

This means that for FFP calculations included in the 2023 year loss of £20.3m was £6.1m of amortisation so a loss before amortisation of £14.2m.

Financial Fair Play / Profit and Sustainability:

For 2024, and if we assume QPR did not add more than £1m in registration costs (which seems likely given the players coming in) and these players are on 3 year deals, then QPR will be adding at most £0.3m to the yearly amortisation charge. If we assume all of the £2.2m falls into 2024 and then add the £0.3m, then the charge for the year is £2.5m, a £3.6m reduction vs the 2023 results. The income from gate receipts and TV money etc feels like it will be in line with prior year and there’s no reason to believe the operating costs would have increased, if anything the player budget would like to have been reduced, so at worst we would see this:

£20.3m - Loss for 2023
(£3.6m) - Less amortisation saving in 2024
£16.7m – 2024 potential loss

QPR have to fund the sacking of Ainsworth within the June 2023 - May 2024 period but we also covered the sacking of Critchley in the 2023 year. It appeared from the outside that the Critchley sacking was paid for from the Glasgow Rangers compensation for Beale. Ainsworth was on a 12 month rolling contract, as we assume were his staff, so that money will be an additional cost in 2024. That said, the MaTrade stadium sponsorship deal seems to have been signed to cover that…so we are back to square on managerial changes.

With these moving parts it feels like with a reduced wage bill: Roberts, Dieng, Dickie, Balogan, Laird, Irorgbunam being offset by (cheaper?) replacements, or in the case of the January loans only 50% of a full year’s equivalent salary, would reduce the operating costs further. £1-2m seems like an reasonable estimate. So that £16.7m reduces to close the £15m annual loss, which before allowable deductions seems like about the amount allowed under FFP (£13m). There may be a large dollop of wishful thinking here but it is in line with public statements made by Lee Hoos, who seemed pretty focused on this topic.

Feeding the above into the widely circulated FFP reporting figures (I’m not sure what level of certainty we can put on these) then is seems like QPR will be close to compliant with some additional player sales or reduced costs. Can we erect a statue to Eze somewhere please, his decision to sign a new contract when he could have easily walked away on a free was an example of unselfishness so rarely seen in modern football. If he wouldn’t mind just moving to Man City now for £30m+, that would be the icing on the cake.

21/22 £24.6m loss in books = £19m FFP loss (has the £19m ever been confirmed?)
22/23 £20m loss in books = £15m FFP loss (if we apply the same ratio)
23/24 £16.7m loss (estimate above) = £12m FFP loss
24/25 £12m FFP loss is maximum allowable but looks in line with 23/24

Thankfully the worst year 21/22 (the Eze money spree madness!) will fall out of the three year rolling calculation next year. The open question is whether the FFP book balance between 2021-2024. On the face of it we seem to be looking at £46m, a £7m overspend. These figures come from assumptions built on assumptions, but it does chime with the Beale’s statement of £10m shortfall in 2024/25 he let ‘slip’ at a supporters meeting (definitely by accident not to pitch roll for justification for leaving the club, he’s far too honest for that).

Significant unknowns:

1) Premier League offer to EFL for foreign TV right, latest offer in September was for c.15% of the amount (EFL wants 25%) of which 75% of that goes to the Championship. £88m this season, £101m next and £169m the final of three years. So would QPR be entitled to something like: £101m x 1/24 x 75% = £3.1m. Seem high considering Broadcast rights are only about £9m for 2023 and 2022, but these are the figures being publicly stated.
2) Player sales. The Championship transfer market has shown some minor signs of recovery but it’s still on life support. A £5m bid for Chair with one year left on this contract in the summer seems like a good deal but I struggle to see another seven figure transfer fee amongst the squad.
3) FFP deductions, the training ground costs could be significant in the P&L, we just don’t know. We also don’t know how much exploratory costs for a new stadium and the previous options for the training grounds have been written off in 2022 and 2023. With one project near completion and the other seemingly in the long grass there is likely some savings there.

I have reasonable faith in the Board to keep us the right side of the line, relegation to League One aside of course. Despite the chatter of being able ‘restructure’ in League One I fear this would be terminal. Not just for the club’s finances bit also the motivation of the shareholders, Ruben in particular.

Overall though leaving FFP aside the results are heading in the right direction so there is some evidence for optimism….and we know where that gets us at QPR!

[Post edited 21 Feb 13:06]

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