Leicester City’s 2017/18 financial results covered a season when they finished 9th in the Premier League and reached the quarter-finals in both domestic cups. Claude Puel replaced Craig Shakespeare as manager in October. Some thoughts in the following thread #LCFC

#LCFC profit before tax significantly decreased from a record £92m to £2m (profit after tax down from £80m to £1m), as revenue fell by around a third (£74m) from £233m to £159m, because there was no repeat of the unprecedented 2016/17 Champions League participation.

The #LCFC revenue decline was driven by broadcasting income’s £67m (35%) decrease to £124m, mainly due to £70m from the Champions League in the prior season. For much the same reason, gate receipts fell £4m (22%) to £13m, while commercial income was also £4m (15%) lower at £22m.

Despite the revenue fall, #LCFC wage bill rose £6m (6%) to £119m; while player amortisation shot up £19m (63%) to £48m. On the other hand, other expenses were down £7m (23%) to £23m, while the previous season included £3m for the settlement of the EFL FFP dispute.

#LCFC had the highest profit (£92m) in the Premier League the previous season, but their 2017/18 profit of £2m is among the lowest reported to date, though in fairness it is considerably better than the losses made by 3 clubs: Watford £32m, Stoke City £30m and Everton £13m.

As the club said, “In the wake of the successful run in the lucrative Champions League 12 months previously, profits for 2017/18 were predictably significantly reduced.” In fact, #LCFC 2016/17 £92m profit is second highest ever in the PL, only surpassed by #LFC £125m in 2017/18.

#LCFC figures benefited from £38m profit on player sales, mainly Danny Drinkwater to Chelsea, but also including Tom Lawrence to Derby County. If excluded, would have reported a £36m loss. Some clubs registered very high sums: #LFC £124m, #AFC £120m, #CFC £113m and #EFC £88m.

After 8 consecutive years of losses (2007-14), #LCFC’s promotion to the Premier League has produced 4 years of profits, amounting to £137m. Obviously boosted by amazing £92m in 2017, but also includes very respectable £26m in 2015 and £16m in 2016.

#LCFC profit from player sales between 2009 and 2015 was very low, averaging just £1m a year. However, this has grown to £29m average in past 3 years, including 16/17 sales of Kanté & Schlupp. Next year will benefit from Riyad Mahrez’s £60m sale to Chelsea plus Musa & Iborra.

#LCFC EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), a proxy for cash operating profit, as it strips out player sales and exceptional items dropped from £91m to £18m, but it has been positive every year since promotion to the Premier League.

Following the steep decline, #LCFC EBITDA of £18m is back in the bottom half of the Premier League, but for some context, given that they are rivals for the “7th place trophy”, it is more than twice as much as Everton’s £7m.

Although #LCFC revenue was impacted by the absence of Champions League money, the 2017/18 revenue of £159m was the only the second time the club has posted an income over £150m and is £30m (23%) higher than the £129m two years ago, when they were crowned Premier League champions.

#LCFC £159m revenue is the 10th highest revenue in England, having been overtaken by #EFC, #NUFC and #WHUFC. The gap to the Big Six is enormous, as Leicester generate less than half of 6th placed #THFC £379m, while they are £430m lower than 1st placed #MUFC £590m.

#LCFC had the 22nd highest revenue in the world in 2017/18, though they have dropped 8 places from 14th in the Deloitte Money League, highlighting the importance of the Champions League. Their 78% reliance on TV money is higher than any of the clubs in the top 20.

#LCFC TV money from the Premier League increased £2m to £118m. Merit payment was up £6m (9th vs. 12th), but facility fees were down £5m, as club were shown live fewer times (12 vs. 16). Revised distribution in 2019-22 would mean higher income for Leicester if finish in top half.

The club stated that it “aspired to re-enter European competition in future”, which is unsurprising, as #LCFC earned €82m (£70m) in 2016/17 for reaching the Champions League quarter-finals, second only to Juventus’ €110m, but more than Real Madrid got for winning it (€81m).

They added, “Qualification for European competition has a highly material impact on the revenue and cash flows.” In fact, their solitary, albeit very lucrative, season in the Champions League means #LCFC have the 7th highest earnings from Europe of English clubs in last 5 years.

Gate receipts fell by £3.6m (22%) from £16.5m to £12.9m, due to lack of Champions League matches, though partially offset by more home games in the domestic cups. This compared favourably with previous seasons, i.e. up 11% on 2016, but is still in the lower half of the PL.

#LCFC average attendance fell slightly (by 1%) from 31,893 to 31,636, which was the 10th highest in the top flight, sandwiched between Everton 38,797 and Southampton 30,794. Ticket prices have again been frozen for 2018/19, the fourth consecutive season.

#LCFC commercial revenue was down 15% (£3.9m) from £25.7m to £21.8m, presumably due to success-related clauses. Despite recently winning the Premier League and a good performance in Europe, this is still a lot lower than the elite clubs, e.g. around a fifth of 6th highest #THFC.

#LCFC have a marketing agreement with Trestellar Ltd for King Power shirt and stadium naming rights. The shirt deal is reportedly £4m a season. New deals in 18/19: Adidas replace Puma as kit supplier, while Bia Saigon replace Siam Commercial Bank as sleeve sponsor.

#LCFC wage bill rose by 6% (£6m) from £113m to £119m, due to further investment in the playing squad, so has more than doubled compared to first season back in the Premier League in 2015. Following the large revenue fall, the wages to turnover ratio surged from 48% to 75%.

As a consequence, #LCFC £119m wage bill is currently the 8th highest in England, only behind the Big Six and Everton. They are ahead of Southampton and Crystal Palace (both £112m in 2016/17) and West Ham £107m.

The increase in #LCFC wages to turnover ratio to 75% means that this is the 2nd highest (worst) in the Premier League of clubs that have reported to date, only below Everton 77%. This is not terrible, but it is above UEFA’s recommended 70% maximum limit.

Increased investment in the playing squad meant player amortisation, the annual charge to expense transfer fees, rose by £19m (63%) from £30m to £48m. This expense has shot up from just £3m in 2014.

Following the increase, #LCFC player amortisation of £48m is now the 7th highest in England, actually above #THFC £43m, though this may change when they publish 2017/18 accounts. Still only around a third of big-spending #MUFC £138m and #MCFC £134m.

On the other hand, other expenses fell 23% (£7m) from £30m to £23m, due to reductions in Champions League operating costs £3.4m, retail cost of sales £1m and a £3.6m favourable foreign exchange movement. Includes a £3.5m payment to King Power for “management services provided”

#LCFC splashed out £93m on player purchases in 2017/18 (including Iheanacho, Silva, Iborra and Maguire), though this was actually less than the £102m spent the previous season. Lower than the Big Six (except #THFC who are a special case), but also less than half of #EFC £215m.

On a cash basis, #LCFC net spend has increased in the last 4 seasons to an annual average of £34m, much more than the £5m for 2008-14. Since these accounts closed, have spent a net £43m on new players, bringing in Maddison, Pereira, Söyüncü, Benkovic, Ghezzal, Ward & Evans.

The market value of the #LCFC playing squad has been assessed by the directors as £347m, which is around £200m more than the value in the accounts, implying significant unrealised profit. This value has significantly increased in the last 3 years from £65m in 2015.

#LCFC gross debt has fallen by £4m to £25m, all owed to owners: £15m finance leases from stadium purchase and £10m subordinated loans. Debt was significantly cut in 2014 by converting £103m of shareholder loans into equity.

However, since these accounts closed, #LCFC have taken out bank loans from Macquarie to help fund major infrastructure projects: the build of a new training ground and stadium development. First loan is factored on the Mahrez transfer fee, while second is guaranteed by TV money.

#LCFC £25m debt is one of the lowest in the PL, though will increase for infrastructure projects. They also owe £68m of transfer fees to other clubs (up from £32m). In addition, £26m contingent liabilities potentially payable, dependent on player appearances and team success.

#LCFC only paid £4k interest in 2017/18, as subordinated loans are interest-free. The finance leases have an 8% interest rate, but this appears to be only accrued and not paid. Charge should increase going forward with additional external debt for training ground and stadium.

#LCFC generated £29m cash from operations in 2017/18, but then spent a net £50m on players, repaid £3m of loans and paid £1m of tax, which resulted in a cash outflow of £25m. The club has not needed any owner financing since promotion to the Premier League.

However, since King Power acquired the club in August 2010, the owners have put in £186m (£106m share capital and £80m loans), while £121m has come from operations. Most went on player purchases £164m (net) and repaying old loans £115m, while cash balance is up £26m.

#LCFC paid £3.1m to settle the FFP case relating to 2013/14 accounts, which must be considered a small price given the riches that they have accrued since promotion. However, EFL acknowledged that the dispute arose out of genuine differences of interpretation of the rules.

#LCFC desire to “reinvest in its long-term future” is highlighted by the ambitious plans for a new, state-of-the-art training facility (estimated cost £80-100m) and a proposed expansion of the East Stand at the King Power Stadium.

#LCFC chief exec Susan Whelan: “The accounts demonstrate our continued commitment to ensuring revenues generated are reinvested into building a squad & infrastructure capable of competing at such levels on a more consistent basis”, adding “We aspire to challenge the Big 6 clubs.”