Overview
In this post, I estimate the financial performance for Fulham FC for the 2022/23 season (which is in progress at the time of writing).
The key conclusion I reach is that I believe Fulham will report a significant profit for this period, which will be only the third time the club has reported a profit at all (and never on the scale of this) since the beginning of the Al-Fayed era.
This has been achieved by a combination of the following factors:
- The transfer fee amortisation and over-payment of player salaries associated with the clubs summer 2018 spending spree is now materially at an end.
- In part, this is due to a fairly ruthless cutting of non-essential playing staff at the end of the 21/22 Championship winning season
- These player cuts created headroom to bring in new players, and the club used this headroom to bring in around a dozen players whose value was in some way impaired (by this I mean that many of the players did not have a track record to suggest with confidence that they could perform at the desired level).
- However, the recruited players have, in most cases, performed well above expectation for their cost and profile, resulting in a disproportionately successful season on the pitch. Despite a recent dip in form, I have assumed Fulham can finish in 11th place, and this would release significant merit-based pay in their central award for the season.
Subject to the assumption that Fulham are able to broadly maintain current league position and that the estimated salaries and transfer fees shown online for the playing staff are broadly accurate, I am expecting Fulham to report a profit for the season of around £30m.
This has significant implications for the clubs spending capacity going forward and that will be the subject of my next post.
Introduction
This post seeks to do two things:
- Estimate the Adjusted Earnings Before Tax figure for the current 22/23 season
- Use this number to determine the FFP position at the end of the 22/23 season
The challenge for this will be that the 22/23 accounts will not be published for another year, but I believe that there is enough information in existing accounts to have a good go at estimating the numbers required.
For the first part of the challenge, I will be estimating numbers to go into this table which I will use to calculate the unadjusted Earnings Before Tax figure for the 22/23 season.
I will then take the resulting figure and plug that into this FFP calculation table which will allow me to make allowable FFP adjustments to derive the Adjustment Earnings Before Tax figure and then calculate the overall FFP position.
This table is already completed for previous time periods in the FFP assessment period (see part 1 to this series for more on this).
Turnover
In order to estimate the club’s turnover for the 2022/23 season, it is helpful to start by looking at, and benchmarking to, a previous year where Fulham where in the Premier League. For the purposes of this exercise, I have shown below an extract from the 2018/19 season accounts as that was a Premier League season before the pandemic, which would have had a major impact on some of these numbers.
Its interesting to note how little of the club’s turnover comes from gate receipts, particularly in the Premier League. In the season above, £10.6m out of £137.7m comes from ticket sales (7.7%).
In the 2018/19 season the old Riverside stand was still operational, and average attendances at the Cottage were 24,371.
So far this season, with the new Riverside stand partially open, average attendances have been 23,502. This number will creep up in the season run-in as the capacity of the stadium has gradually increased through the season (now about 24,500).
Season ticket prices have also increased, and individual ticket prices have been high (and controversial). Its hard to estimate the actual impact of the ticket prices on gate receipts (and also note that Fulham had a bit of a cup run including a tie at Old Trafford). But I am going to estimate a fairly significant increase in Gate Receipt income to about £14m. This is not based on any real calculations, but a rough estimate.
Central Awards and Broadcasting is essentially the TV money. It includes a considerable ‘merit’ based element, where the higher you finish in the league the more money you get. I’m going to assume Fulham finish 11th (based on my Monte Carlo simulations) and then look at the money that last year’s 11th placed team got (that was Newcastle).
Newcastle received £125.3m in Central Award/TV money. So I will assume this is what Fulham get.
Finally, there is the Sponsorship and other Commercial Activities, this is hard to judge, I am going to estimate this is the same as 2018/19 (the last pandemic free Premier League season) and therefore £17.7m.
Putting this together in the table above gives us a turnover of £157m. This would be, by some distance, a record for the club.
We can now add this to our Earnings Before Tax calculation
Profit on Disposal of Player Registrations
This is the profit that the club makes from selling players. This is not the same as the total transfer fees received, but is, instead, the transfer fee received, less the carrying value of the player on the balance sheet. I have written about the way players are valued on the balance sheet before and you can read about that here (link)
During the 2022/23 season, only one player left Fulham for a transfer fee, that’s Anguissa (the Carvalho transfer went through in the 21/22 season).
Anguissa is reported by Transfermarkt to have left for a fee of £14m.
To calculate the profit on this sale, we need to know the carrying value on Anguissa’s player registration at the time of the transfer.
Transfermarkt says that Fulham signed Anguissa for £21m (other sites report the figure as being £25m) in the summer of 2018 as part the huge (and unsuccessful) expenditure which occurred then. The figure of £25m is the one I have seen most often so I will use that.
Anguissa initially signed on a 5 year contract, so his carrying value has been amortising by £5m a year.
After 3 years (taking him to summer 2021) his carrying value had therefore reduced to £10m. He then signed a contract extension, leaving him with a further 3 years to run on the contract.
The amortisation of the remaining £10m of value then becomes £3.33m per year. One year later, he is sold to Napoli for the £14m figure. At this point his carrying value is £6.66m so the profit Fulham make on the transfer is £14m – £6.66m = £7.34m
This calculation looks about right as the 21/22 accounts do say that Fulham gained £7.4m in profit from player sales after the end of the accounting period, so this matches closely calculation for Anguissa above
This means we can add the Anguissa sale to our Earnings Before Tax calculation:
Also to note in the table above, Fulham don’t normally sell any tangible assets, and I have no reason to think they did this season, so I have filled in that row as nil also.
Wages and Player Registration Amortisation
This is probably the hardest part of our calculation, we have to estimate the cost of players for the 21/22 season. This has two main components:
- The wages paid to players during the season
- The amortisation of transfer fees paid for the current squad.
These are quite core accounting concepts for football clubs, and I have explained them before in some detail here
My approach to this will be to look at the wage and transfer fee amortisation from last season (21/22 in the Championship) and then adjust this to remove the costs associated with players that have now left the club, and then add the estimated costs of the players Fulham added to the squad in the 22/23 season.
So the first step is to set out the player wage and amortisation costs as per the annual accounts:
Fulham spent a total of £121.4m on players in the 21/22 season in the accounts. We know that the wages also include the promotion bonus paid to the players as well, which I have previously estimated at £15m. I have deducted this promotion bonus from the wages paid, and have also applied a 10% uplift. This is because I assume that there will be players whose contracts entitles them to higher pay in the Premier League (we know some of them had relegation wage drops built into their contracts).
The application of these two assumptions gives a total expenditure on players for the 21/22 season of just under £114m.
The next step is to consider the impact on this figure of the players who left the club (either permanently or on loan) at the end of last season. I have captured both their wage (looking this up from various online sources) and a calculation of the annual transfer fee amortisation associated with each player.
These adjustments are set out in the table above, and show a reduction in the baseline player cost to £82.4m associated with the retained Championship winning squad.
Next we have to consider the costs associated with the new players added to the squad for the 22/23 Premier League season. Again online sources have been used to assess the wages and transfer fee amortisation for each player.
This table shows the final estimation of the player costs for the 22/23 season (I will check back in a year to see how accurate this was). It shows an outlay of £130.5m on the playing staff including £96.3m on staff wages.
We can put this figure into our Earnings Before Tax calculation. I have also added expenses for fixed asset depreciation and other operating expenses, and here I have taken typical numbers from previous years accounts (they are not usually material).
All of which leads to the surprising conclusion that Fulham are estimated to have turned a fairly sizable profit (before tax) of £31.6m for the 22/23 season. This would only be the third time Fulham FC has had a profitable season since Mohamed Al-Fayed took ownership of Fulham over 25 years ago.
22/23 FFP position
If we plug our Earnings before Tax calculation into our FFP position calculator for the end of the 22/23 season we see the following:
The outcome at the bottom left that Fulham were allowed to lose £72m on a Adjusted Earnings Before Tax basis, but the actual AEBT loss for this period is estimated at only £14.9m. Giving Fulham around £57m in FFP headroom at the end of the 22/23 season! This is probably the strongest FFP position the club has been in since FFP was introduced.
I will write more of this in the final part of this trilogy, which will look at spending capacity for the Summer 2023 transfer window.
Cottage Analytica 