QPR's accounts released and heading for £50m fine

March 14, 2015

QPR’s controversial accounts were released this week.  As anyone following this story will be aware, the club recently announced profits via a vague Press Release which claimed that surprisingly low losses of just £9.7m had been made in 2013/14.  A number of people raised questions about how this could have been achieved without some accounting ‘slight-of-hand’ (see my previous article).

Now we have the accounts, it transpires that the club owners wrote off £60m in loans and classed this event as one-off income injection in the Profit & Loss account.  If the £60m had been classified conventionally, the club would have reported a loss of £69.7m.  The club accounts can be found here but the key events are summarised below:

 The Exceptional Item is classified in the accounts as a Related Party Transaction (i.e. a transaction with the owner or someone connected to the ownership of the club).  This makes it easier for the Football League to invoke their RPT rules. The FFP rules make it clear that this kind of transaction simply cannot be included in the Fair Play Calculation.  Section 2.2.1 of the rules explains how such an item must be treated for FFP purposes:

.. a permanent and unconditional waiver of inter-company or Related Party debt must be treated as a capital contribution, as it results in an increase in equity;

Hence QPR are actually facing a ‘Fair Play Tax’ bill for somewhere around £50m. All this raises a number of questions about the way the accounts the way the club has portrayed events.

The original QPR Press release (here) seemed to have been written to suggest that the improved figures were in large part due to due to lower player costs (whereas in reality the wage costs and amortisation have improved by less than £2m). You have to wonder why the club tried to present events as they did.

The level of wages is interesting – essentially the club paid almost the same amount of wages in the Championship as they did in the Premier League (£77.3m). This is the highest level of wages ever paid by Championship club. OK, some of this figure (perhaps £5m or so) will relate to promotion bonuses but it is worth comparing QPRs wages to the approximately £13m wages paid by Derby –the club QPR defeated in the Play-off final.   FFP constraints were brought in to help put a lid on wage escalation – however QPR almost seem to have felt they could play to a different set of rules.

The accounts themselves are also notable for the very thing they fail to mention: the £50m FFP fine.  One would have thought Tony Fernandes Chairman’s Statement or the accountants or the auditors would have mentioned, at least in passing, a £50m fine? It is hardly small change and the fine is larger than last season’s turnover.  If there is a juggernaut coming round the corner, the accounts should put you on notice – none of the professionals connected with pulling this document together have covered themselves in glory.

There is a potentially interesting detail in the way the £60m loan has been written off. QPR is owned 69% by a Tune QPR and 30% by Sea Dream. Tune QPR is owned by Fernandes, Maranun and Gnanalingam; Sea Dream is owned by the wealthy Mittal family. Of the £60m loan write-off, Mittal’s share was £5.6m or 11% of the amount written off.  It is unclear why the write-off was structured in this way and it is possible that Tune QPR have agreed to be responsible for most of the debt.

Club debt now stands at £205m – despite the £60m loan cancellation, club debt has actually increased by around £5m.


QPR figures not all they seem

March 2, 2015

QPR issued a press release on 2 March to announce that the club had improved on losses of over £65m in 2012/13 and had made losses of just £9.8m in 2013/14.  Not only that, but the owners had paid off loans of £60m. On the face of it, a terrific improvement and stories about the club being hit by a £30-£40m FFP fine were clearly wider of the mark.  However, things are not quite as they may initially seem

The improvement was both stunning an unexpected. And as we know, when something seems...

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The Championship Embargo and Premier League's role in the rule change

December 13, 2014

New spending constraint rules have been voted-in by Championship clubs. The new rules replace the term "Financial Fair Play" with the term 'Profit and Sustainability' and crucially do not come into effect until next season (2015/16). The actual vote was a close run thing with 6 clubs voting against the change (Ipswich and Charlton were amongst the clubs that voted against the new rules).

The deferral of the implementation of the rules means that clubs must keep to the 'old' limits, and keep lo...

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QPR still on a collision course with Football League

November 13, 2014

Although Championship clubs voted for new FFP rules on 6th November, QPR are still on a collision course with the Football League. The rule changes do not expressly alter any sanction applied as a result of the club's overspend during 2013/14.

Although QPR’s accounts have not yet been released, it is inconceivable that they would have been able to keep losses below the threshold for the 2013/14 season (£3m maximum loss, or £8m if the owners injected £5m equity). Looking the most recent ac...

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Which Championship clubs can expect to receive a Transfer Embargo?

October 30, 2014

With Championship clubs due to submit their Fair Play information to the Football League by 1 December, it is worth considering which clubs are likely to have breached the rules and the likely impact.

Looking at the Championship clubs, 9 are viewed as being ‘Likely’ or ‘Very Likely’ to receive a Transfer Embargo from January.

The Football League will look back at the season 2013/14 and determine which clubs exceeded the permitted loss limits for that season. During 2013/14 clubs were ab...

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Was FFP the reason for high-profile 'Loan&Buy' deals this transfer window?

September 3, 2014

During the Summer 2014 Transfer Window we saw a number of deals where a player was loaned for 12 months, with the option to buy at the end of the loan. There were a number of reports that FFP was the reason for this type of transaction and it is worth exploring the issue.

There are a number of reasons why clubs might want to enter into a 'Loan&Buy' deal:

To get round a spending cap

Under the UEFA FFP sanctions, Man City and PSG were give a net player spending restriction (in addition to other sa...

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Championship FFP rules ‘undermined’ by Premier League

May 26, 2014

Last week, the Championship clubs voted on a number of potential changes to the existing FFP rules. However, as none of the tabled amendments could muster the required 75% of the vote, the rules will remain as they are.  Huddersfield issued an excellent summary of the proposed changes and outlined their disappointment that ‘real-time’ monitoring of finances was not approved.

Under the current rules a ‘Fair Play Tax’ is levied on all clubs that gain promotion to the Premier  League but ...

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Reports of record €60m (£49m) fine for PSG and Man City

May 6, 2014

Following recent press reports, we now have a much better idea about the sanctions that are reportedly being offered to Manchester City and PSG. It is now up to the clubs to decide whether to accept the terms or risk a potentially more severe punishment. The punishment reported in the press raises a number of interesting questions:

Why is City’s fine so large?

When City filed their accounts, on the face of it they looked to have nominally passed the FFP Break Even test (after permitted exclus...

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Man City failure of FFP test - a matter of choice

April 30, 2014

So, now we know that Man City (and PSG) failed the FFP Break Even test. However, this was no accident. Man City didn't fail the test because of an oversight - they failed because they chose to fail. The following analogy is helpful: 

I recently handed my son £5 to buy some sweets, telling him to spend no more than £1. Inevitably, he came back with quite a lot of sweets having spent about the £1.50. He didn't exceed the budget because he wasn't able to count - he just evaluated the pros and ...

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The Benefactor Model - permitted in League 1 and 2

April 23, 2014

The Football League has clarified an important aspect of how their FFP rules operate within League and League 2. Interestingly, the FL have confirmed that their Salary Cost Management Protocol (SCMP) rules permit 'benefactor' owners to finance a club's ongoing losses (something that is restricted within UEFA, the Premier League and Championship rules). 

The League 1 and League 2 rules require clubs to submit regular financial forecasts to the Football League. Only if a club is operating within...

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