Financial loss worth taking if Leeds hit big time
THE SCALE of the investment Leeds United have had to make to turn themselves into Championship promotion contenders has been revealed by the club’s latest accounts – but the Whites are confident they have stayed within the Football League’s profit and sustainability rules.
The latest figures, published yesterday, show a £21.4m loss for 2018-19 – Marcelo Bielsa’s first season as head coach.
All of that and a little bit more is taken up by the increased wage bill needed to attract the worldrenowned Argentinian and his coaching staff, and back them with the quality of players they wanted.
Leeds finished 13th in 2017-18, making a £4.3m loss. After it, manager Paul Heckinbottom was sacked and replaced by former Argentina and Chile coach Bielsa.
The veteran did not come cheap, but the Elland Road directors decided it was an investment worth making to return to the lucrative Premier League, which Leeds have not played in since 2004.
They fell short last season, finishing third and beaten by Derby County in the play-off semi-finals, but showed their faith in Bielsa by concentrating their finances on retaining him and the bulk of his squad in the summer. When English football went on hold for the coronavirus pandemic, Leeds were top of the Championship, seven points clear of third place with nine matches to play.
The severe economic difficulties caused by Covid-19 has highlighted how badly financially run some clubs are and as the division directly below global football’s wealthiest domestic league, the Championship is perhaps the most vulnerable to irrational spending.
Adding £22m to their wage bill last season, increasing it to £46m, gave Leeds a wages-to-income percentage of 94 per cent, ridiculous in many businesses, but lower mid-table in the Championship. Reading’s ratio was 226 per cent and yet they finished 20th.
The Championship has “profit and sustainability” rules to regulate spending, and yet in losing more than more than £21m, Leeds are confident they have kept within them. Clubs are allowed to lose £39m over a threeyear period.
Each Premier League season is usually worth a nine-figure sum, due largely to its extraordinary broadcast deals, so being one of the three promoted clubs justifies the expense.
Around £20m was set aside last season for bonuses to playing and non-playing staff if the club won promotion.
Partly helping offset the increased wages was a rise in average Elland Road attendances from 31,500 to 34,000. The club also raised around £15m in transfer sales, principally Ronaldo Vieira and Jack Clarke, loaned back for the first half of this season by Tottenham Hotspur.
All revenue streams across the business were up year on year, and turnover rose by £8.3m. Gross profit went from £23m to £39m, and operating losses were £36m.
A further £2.5m was spent improving the Thorp Arch training ground to Bielsa’s exacting standards and on new hospitality lounges and the like at Elland Road. Training ground improvements are exempt from “profit and sustainability” rules.
Leeds are opposed to the league’s version of financial fair play, but determined to stick to it. Birmingham City were docked nine points last season for a breach.
It explains why Leeds were unable to sign the striker with Championship experience they wanted when Arsenal recalled loanee Eddie Nketiah in January.
Leeds were quoted fees in excess of £20m for many of the players they targeted, making them impossible to buy outright without breaking the rules. Instead, they loaned RB Leipzig forward Jean-Kevin Augustin, yet to make his first start for the club having arrived short of match fitness after a loan at Monaco where he was under-used.
Leeds were frugal in their summer transfer dealings, although they are committed to making
Helder Costa’s season-long loan permanent this summer at a cost of around £15m. The sales of Pontus Jansson, Kemar Roofe and Bailey Peacock-Farrell will be in next year’s figures.
With average attendances increasing again this season, plus some lucrative centenary events and increased sponsorship, Leeds were on course for improved commercial revenues, although as with all small businesses, the unknown is the extent of the damage the coronavirus pandemic will cause. Leeds players and coaches were among the first in England to agree substantial wage deferrals to protect lesser-paid staff at the club. As a thank you, the club will pay interest on the deferred pay once football resumes.
They are, however, thought to have furloughed some matchday staff, following the examples of Bradford City, Doncaster, Huddersfield Town, Middesbrough and Sheffield Wednesday in topping up the remaining 20 per cent of wages.
Leeds will be favourites to win promotion if the 2019-20 campaign is able to resume as the authorities hope, but what will happen if that is impossible remains unclear.