3 Club Comparison

How do Derby and SWFC spend so much?

I’ve been asked a couple of questions about Leeds United’s accounts and how we compare with other clubs. This is not something I generally do since other commentators do a fine job looking at all Championship Clubs (see Swiss Ramble and Price of Football).

However, I was asked specifically how Sheffield Wednesday and Derby can spend so much money when Leeds United seems forever short of cash and this essay looks at that specific point.

I’ve also included a short explanation of cash vs profit since some fans are confused by comments by Andrea Radrizzani about how cash from the sale of Chris Wood is received over three years yet the total profit from his sale will appear in this season’s accounts only.

I am using data from the last two published accounts and have added everything together for these two seasons – ie they cover the seasons 2015/16 plus 2016/17 and from a Leeds United point of view are basically Massimo Cellino’s responsibility except for £14.5m of funding the Andrea Radrizzani injected at the very end of this period.

Why compare SWFC and DCFC?
Well the easy answer is they were two clubs I was asked about but they are suitable since neither club gets parachute payments, they are both a “similar” size to Leeds United and both in similar areas geographically. They both also have a reputation for spending money freely on players.

Profits, Losses and Costs
The main point of this essay is cash rather than profit but a quick deviation to profit is relevant for showing that the clubs have broadly similar costs. I’m using a very broad brush here:

  • Leeds United had a turnover of £65m over these 2 seasons and costs of £73m leaving a loss of £8m
  • SWFC had a turnover of £45m over these 2 seasons and costs of £75m leaving a loss of £30m
  • DCFC had a turnover of £52m over these 2 seasons and costs of £75m leaving a loss of £23m
  • Thus all three clubs had similar total costs by value – although they spent these costs in different ways. This means the three clubs can be said to be similar and worthy of comparison.

    I’m not going to analyse how these costs were spent since the detail is not readily available.

    Cash vs Profit
    As Andrea Radizzani said, when clubs sell players they often get the money paid in dribs and drabs over one or more years. For small values the transfer fee may be paid in full immediately but for larger fees they can be received over quite a long time.

    In the Club’s accounts the accountants will say that the profit from sale should appear in the Profit and Loss account as soon as we lose the benefit of that player. The asset value that the player represented in the Balance Sheet is immediately removed as well. So all reference to the player is churned through the accounts immediately. However, because the cash isn’t all received the accountants include an item in the Balance Sheet of money owed to us (technically called a debtor) and from then on the accounts represent money and not the player.

    So player profit appears immediately but cash comes in later. After a few years, when all cash is in, the total cash received and profit claimed earlier will be equal.

    We fans are interested in profit and losses because they represent the data for FFP testing (with a few small adjustments). The management of the club are interested in cash in the bank and cash due to be received because they need cash to pay wages, taxes etc.

    If the club makes losses then that means cash is draining out of the bank account, if the club makes big player purchases then maybe half or so of the fee will be needed to be paid immediately and there is more of a drain from the bank account.

    When the cash in the bank of a football club runs out the owner normally steps in with either a loan or buys newly issued shares. Sometimes a new investor is found to buy newly issued shares and sometimes a finance institution can make a loan. In the case of Leeds, Sheffield and Derby all funding basically came from owners.

    Cash rather than Losses
    Ok, I’m now switching just to talking about cash. That is cash that is received by the club within the 2 seasons I’m looking at and cash that flows out.

    Cash Spent on Players
    Remember this is cash paid out in the 2 year period. If a player is bought for £30m and is paid for over three seasons than only £10m or £20m of cash will have been spent in the 2 seasons.

    Player Cash

    Here we can see that Derby spent a lot more cash buying players than either Leeds or Sheffield Wednesday.

    Again, remember that cash spent each season on buying players in different to the ammount charged to the profit and loss account each season – do not confuse cash and losses!

    Paying for these Players
    I showed above that each club has roughly the same costs to pay for each season on top of paying for players so where did the cash come from?

    Obviously some cash came from TV money, tickets sales etc which all adds together to make Turnover. Although the clubs have similar other costs they have differing turnovers.

    Turnover Cash

    This shows that Leeds United have a far larger turnover than either of the other two clubs.

    Cash From Players
    I’ve not yet included the cash received from player sales. Remember this is cash received within the 2 year period and not the transfer fee price achieved.

    Player cash in

    This shows that Sheffield Wednesday didn’t get much cash in at all from player sales (ie they held onto players bought previously) and Derby had about £9m in cash come in whereas Leeds got the most cash at £12m.

    Total Cash Outflows
    Now we are able to show how much cash in total has flowed out of these three clubs over the two year period.

    Cash Outflow

    Getting things in Balance
    Just like in our own lives when cash is repeatedly coming out of our wallets, purses or bank accounts we quickly become very poor and go bankrupt. The same is true for companies and football clubs.

    The best way for a Club to stop cash coming out of the bank account is to stop buying players and sell more tickets at higher prices so that a profit is made. However, in the Championship this is next to impossible to do and remain competitive.

    So owners or investors must step in to replace this lost cash. This is what happened with these three clubs.



    (excuse the different scales!)

    Total Investment

    The timing of cash being paid for players bought and received for players sold makes running a football club very hard.

    Almost all clubs lose money and buying a squad of highly paid, skilled players requires an outlay of quite a lot of cash.

    As can be seen, Derby’s owners have put in a huge amount of money over the last years and they will only get that money back if they can sell the club for more than they’ve invested. I’ll leave it to the reader to decide whether Derby were worth the £150m they would have to be sold for at the end of last season for the owner’s to recoup their money.

    By spreading the transfer fees of players over long contracts of up to 5 years Derby have been able to reduce their annual costs charged to their Profit and Loss account but this does not affect the cash requirements. For FFP tests these losses roughly translate into the FFP limits and this graph shows what each club has set against FFP over the first two years – when any losses from this season are added in the total must be less than £39m to avoid failing.


    Again I’ll leave it to the reader to decide who may be in trouble this summer.

    Again I’ll leave it to the reader to decide whether Andrea Radrizzani should, or is likely to, put in £100m having already spent over £75m getting to where we are.

    Derby spent all this cash and still haven’t been promoted and their owners could lose a bundle, just like Ellis Short has at Sunderland.

    Mike Thornton 12th May 2018