Reading FC Finances

[PistolPete]

Ok, I searched for probably half an hour but couldn't find a suitable thread to add to so I will start a new one - Mods, do what you will...

Reading, since their move to 'The Madejski Stadium', seemed to be the blueprint for a well run club; I remember stories of US stadium builders coming en mass to view our new home as shining example of how to build a stadium at a sensible price. The club was buying and selling sensibly and never paying over the odds. We appointed a frugal manager who added the miracle signings of Kitson (150k) Stephen Hunt (free) Kevin Doyle (70k) Ibrahima Sonko (free), Lita (1m) and Federici (free) after sigings of players like Shorey, Sidwell and Harper before him; we even managed to sell Andy Hughes for half a million!

All players seemed to be on sensible money and the club even employed a limited to 1 season extension policy for players over the age of 30 (even if this was a bit strange). We openly refused to offer Sidwell the contract he desired in our quest to keep wages sensible.

In 2006 we were promoted to the (allegedly) £30m a season premiership, even playing in money spinning Asian competitions such as the Peace Cup and signing a Korean! Sadly we got relegated but not to worry, we had been selling out our stadium and were paying very sensible wages. We had also made a net profit of over £12m in the 12 years we had been at the Madjeski Stadium. Even better news was that we were due parachute payments for two seasons to soften the blow that seemingly didn't need softening.

Simon Cox and Nathan Tyson both played well and earned the frugal Reading money by playing well and earning Reading tidy sell on fees, Nicky Hammond had even apparently paid Cork a small amount of money to pre-emptively buy out Kevin Doyle's sell on to Wolves - we're stinking rich now, no?

Now, Risdale's Leeds... I can understand how they got so skint, but can someone PLEASE explain to me how we have so little money??? (oh, and don't say that Readings players were on big money, they weren't - and those that were, were sold at values which more than compensated for their salaries)

[Millsy]

You're right it makes no sense.

As I speculate on another thread, Madejski is just sucking the club of its money before he goes.

Please let's get a chairman who actually likes football and doesn't treat us all like ***

[Royal Rother]

We are generally not in the business of spending money we don't actually have.

We are not in the business of racking up big loans owed either to institutions or individuals.

We are run as a proper business, hence we are a pretty secure financial entity.

Most other clubs that appear to have had money actually haven't. They have just run up debts by gambling loads - some will have succeeded in their gamble, Birmingham and Sunderland might be a couple of examples but although he was prepared to gamble on promotion last season SJM would not jeopardise the long term future of the club by doing so a second time.

Football's finances is basically smoke and mirrors - we are one of the few clubs that doesn't participate wholeheartedly in that game. Thus I suspect we are, despite facing the threat of relegation, in a better financial position than the substantial majority of the other 92 League clubs.

[10539.4 Miles Away]

Stable financially is one thing, but what is actually the point of it? What's the game plan? Are we counting on 20 other clubs going broke so that we get back into the Prem just by being solvent? And what happens if the relegation happens, season ticket sales down, gate receipts down, hospitality, tv coverage, all heading the same direction, what does our stable financial position actually do for us?

I'm not advocating wild crazy spending beyond our means but maybe, just maybe, we should get a loan, an overdraft, or raise other sources of finance, speculate to accumulate and all that, if my business needed a new piece of equipment or a specifically talented staff member to take advantage of a market then damn right I'd make that investment, even if it meant taking a loan out.

To be honest, I feel more than a little disheartened, to have achieved so much and to now be within touching distance of being exactly where we were to start with is a bit depressing.

[Arch]

but can someone PLEASE explain to me how we have so little money???

I'll have a stab. We arrived in the Premiership on the back of a series of loss-making years, the last two approx. 6 million each. These losses were covered with an overdraft from HSBC. In the Premiership, the TV income was approximately equal to what we paid in wages, and other income (gate income, business income) covered operating costs and left a decent profit both years - ironically about 6m each year. Some of that profit went towards paying down the bank loan. In our first year back down, even with a 40% cut in wages and a couple of big earners unloaded, we still had a very high wage bill, which included raises for Doyle and Hunt. Gate and business income plus parachute payment just about covered the wage bill. Profits from player sales were used to pay down the overdraft. This year, we've had a net positive income of some millions from transfers - who knows how much, because we don't know how much came up front; we've also had another parachute payment, and the wage bill is lower. So the question is, why isn't there money to spend? Here's a half-decent answer: next year there will be no parachute payment and not much profit from sales. The wage bill will exceed income as it does for half the teams in the championship. We have money now that will help alleviate that so long as we don't spend it now. If you lose your job and get a redundancy payment, you don't go out and buy a new car. You squirrel away the money for when you'll need it.

I hope that instead of pouring invective on this explanation, skeptics will be willing to research a little and fill in the numerical details. It may be that when you plug in more precise numbers, there's a lot of millions unaccounted for. Personally I doubt it, but I haven't been careful to make a precise accounting and I may be wrong. Maybe, instead of a slanging match we can put our heads together and come with an accurate and understandable record to the extent possible, and thereby make clear where the issues are and how much is in question.

[Blue Hooped Moose]

but can someone PLEASE explain to me how we have so little money???

I'll have a stab. We arrived in the Premiership on the back of a series of loss-making years, the last two approx. 6 million each. These losses were covered with an overdraft from HSBC. In the Premiership, the TV income was approximately equal to what we paid in wages, and other income (gate income, business income) covered operating costs and left a decent profit both years - ironically about 6m each year. Some of that profit went towards paying down the bank loan. In our first year back down, even with a 40% cut in wages and a couple of big earners unloaded, we still had a very high wage bill, which included raises for Doyle and Hunt. Gate and business income plus parachute payment just about covered the wage bill. Profits from player sales were used to pay down the overdraft. This year, we've had a net positive income of some millions from transfers - who knows how much, because we don't know how much came up front; we've also had another parachute payment, and the wage bill is lower. So the question is, why isn't there money to spend? Here's a half-decent answer: next year there will be no parachute payment and not much profit from sales. The wage bill will exceed income as it does for half the teams in the championship. We have money now that will help alleviate that so long as we don't spend it now. If you lose your job and get a redundancy payment, you don't go out and buy a new car. You squirrel away the money for when you'll need it.

I hope that instead of pouring invective on this explanation, skeptics will be willing to research a little and fill in the numerical details. It may be that when you plug in more precise numbers, there's a lot of millions unaccounted for. Personally I doubt it, but I haven't been careful to make a precise accounting and I may be wrong. Maybe, instead of a slanging match we can put our heads together and come with an accurate and understandable record to the extent possible, and thereby make clear where the issues are and how much is in question.

I think that's pretty much spot on tbh +2

[Comfortably Numb]

but can someone PLEASE explain to me how we have so little money???

I'll have a stab. We arrived in the Premiership on the back of a series of loss-making years, the last two approx. 6 million each. These losses were covered with an overdraft from HSBC. In the Premiership, the TV income was approximately equal to what we paid in wages, and other income (gate income, business income) covered operating costs and left a decent profit both years - ironically about 6m each year. Some of that profit went towards paying down the bank loan. In our first year back down, even with a 40% cut in wages and a couple of big earners unloaded, we still had a very high wage bill, which included raises for Doyle and Hunt. Gate and business income plus parachute payment just about covered the wage bill. Profits from player sales were used to pay down the overdraft. This year, we've had a net positive income of some millions from transfers - who knows how much, because we don't know how much came up front; we've also had another parachute payment, and the wage bill is lower. So the question is, why isn't there money to spend? Here's a half-decent answer: next year there will be no parachute payment and not much profit from sales. The wage bill will exceed income as it does for half the teams in the championship. We have money now that will help alleviate that so long as we don't spend it now. If you lose your job and get a redundancy payment, you don't go out and buy a new car. You squirrel away the money for when you'll need it.

I hope that instead of pouring invective on this explanation, skeptics will be willing to research a little and fill in the numerical details. It may be that when you plug in more precise numbers, there's a lot of millions unaccounted for. Personally I doubt it, but I haven't been careful to make a precise accounting and I may be wrong. Maybe, instead of a slanging match we can put our heads together and come with an accurate and understandable record to the extent possible, and thereby make clear where the issues are and how much is in question.

fantastic post.

[Harpers So Solid Crew]

Except that the released accounts show there was no overdraft in the year ending 2006.

What we did see was £7/8 million spent on the infratructure, we also saw that JM took none of his loans back, at the last set of figures, and those loans have remained stable for the last few years.

It was also said that despite declaring a profit for the two Prem seasons we actually lost money in both of the seasons.

We also saw record transfer fees spent, sadly on some dire players, and a large rise in staff at the club.

I would say we are better off financially now than in the summer of 2005, when SC had very little money, and was forced to buy players like Doyle for around £87k and s Hunt on a freebie. we had so little that in 2005 JM put his hand in his pocket and paid for L Lita

[Wycombe Royal]

Except that the released accounts show there was no overdraft in the year ending 2006.

It was held on the balance sheet under retained profit (loss). I'm not sure what the cash situation was as I have not seen acash flow statement from the club, but too many people mix up profit/loss with cash.

The cash situation is far more important than profit or loss (as the P&L and BS is affected by a lot of non-cash items).

[PistolPete]

Thanks Arch, I guess that makes sense.

I suppose what it really says is if Reading have to do all this to stay neutral in their finances then 95% of other clubs must be in serious, serious trouble.

...And I suppose they are. Most of the top half of the premiership are supported by benefactors (who can or can't afford it) and the rest of the premier league struggle for survival. In the Championship I can only imagine most teams are teetering on the brink!

The question for me then is, how did we lose £6m( ) in the two seasons before the premier league?

Convey (1m transfer fee), Keown (4 months wages) and Ferdinand (5 months wages) and Goater (12months wages)

Baradji ((3 months wages) Lita (1m transfer fee)

Are the only things that were 'out of the ordinary'. We didn't have a huge squad, we didn't pay a fortune on wages - so how did we lose 6m a year at a time when gate receipts and hospitality were doing well??

[Harpers So Solid Crew]

Accounts year ending jun 2008 showed a £2m overdraft, which was presumeably the one that was called in.

No wonder you accountants are always taking exams, they keep moving all the goalposts

[brendywendy]

Stable financially is one thing, but what is actually the point of it?

LOL!!!


anyway- this has been done to death, the accounts show where the money has gone.and this was picked through with a fine toothed comb when the accounts were released last time out. wheres the experts when you need em.

[Wycombe Royal]

The question for me then is, how did we lose £6m( ) in the two seasons before the premier league?

Becuase there is not enough revenue to cover players wages. It really is as simple as that. Player wages in most clubs account for over 60% of turnover, and there are many clubs with a higher ration than that. I remember that Wigan used to be around 120% therefore making a huge loss before any other costs were accounted for.

[Wycombe Royal]

Accounts year ending jun 2008 showed a £2m overdraft, which was presumeably the one that was called in.

I though it was the June 2009 accounts that showed the £6m overdraft and it was paid off with the Doyle money last summer.

[brendywendy]

Thanks Arch, I guess that makes sense.

I suppose what it really says is if Reading have to do all this to stay neutral in their finances then 95% of other clubs must be in serious, serious trouble.

...And I suppose they are. Most of the top half of the premiership are supported by benefactors (who can or can't afford it) and the rest of the premier league struggle for survival. In the Championship I can only imagine most teams are teetering on the brink!

The question for me then is, how did we lose £6m( ) in the two seasons before the premier league?

Convey (1m transfer fee), Keown (4 months wages) and Ferdinand (5 months wages) and Goater (12months wages)

Baradji ((3 months wages) Lita (1m transfer fee)

Are the only things that were 'out of the ordinary'. We didn't have a huge squad, we didn't pay a fortune on wages - so how did we lose 6m a year at a time when gate receipts and hospitality were doing well??

we needed gates upwards of 13000 just to break even on match days- we often didnt achieve this.
even in the year where we did achieve this due to huge success we still made a loss- probably due to bonus payments for promotion, and necessary ground improvements ready for the prem.

[PistolPete]

Yes, I get that, but what I don't get is how those two seasons were any different to any others?

If we made those losses in those 2 seasons, surely we made the same losses in every other season from 1998 onwards?

[PistolPete]

THIS IS NOT POLICY - IT IS ABOUT HOW THE TEAM HAS AND WILL BE AFFECTED BY FINANCES

[Harpers So Solid Crew]

Accounts year ending jun 2008 showed a £2m overdraft, which was presumeably the one that was called in.

I though it was the June 2009 accounts that showed the £6m overdraft and it was paid off with the Doyle money last summer.

viewtopic.php?f=2&t=91522&st=0&sk=t&sd=a&hilit=accounts

Jun07 showed no overdraft, jun 08 showed just under £7m, always assumed that was the infrastructure improvements.

Looking at 2008 it seems like we had £26m owed to JM for the football club and hotel, plus another £16m in debt, I would hope that most of that £16m is now cleared and leaves just the debt to JM.

God forbid if we were now runn at a £42m debt.

[Harpers So Solid Crew]

Yes, I get that, but what I don't get is how those two seasons were any different to any others?

If we made those losses in those 2 seasons, surely we made the same losses in every other season from 1998 onwards?

Depends if certain costs of the original stadium build were accounted during those two seasons.

[westendgirl]

Accounts year ending jun 2008 showed a £2m overdraft, which was presumeably the one that was called in.

No wonder you accountants are always taking exams, they keep moving all the goalposts

And no wonder we need to do a lot more explaining....

A balance sheet is a snapshot in time so you cannot assume that the level of overdraft at June 2008 has any relevance to the overdraft called in in the summer of 2009 as there is a lot of time to build up given the (alleged) gamble taken to get promotion.

PistolPete there is one very straightforward answer to you question of where the money has gone and that is - the players. There was supposedly a 40% drop in wages on relegation but the accounts from 2008 to 2009 show nothing like that drop which does tend to fit with the idea of spending more on the players who were going to get us promoted - shame it didn't work! There was also some capital expenditure on the training ground and the offices and media centre at the stadium that has to come out of profit.

Am at work but have copies of the 2008 and 2009 accounts at home so will try to post something this evening more to give specifics.

However I would say this was done to death earlier in the season and my impression was that if you thought the club was in some sort of conspiracy to pull the wool over the fans eyes (and that SJM is milking the club) then nothing anyone says about the accounts and finances will persuade you differently. Still I am willing to help with information if there is anything specific you want to know from the accounts so you can draw your own conclusion.