Whopping £49m loss

by Art Morte Fri May 04, 2012 11:30 am

Liverpool make £49.4m yearly loss

Former manager Roy Hodgson's exit and a failed stadium plan contributed to Liverpool making a £49.4m loss in the last financial year.

Club owners Fenway Sports Group (FSG) wiped out £200m of debt after buying the club in October 2010.

But accounts filed with Companies House show FSG then wrote off another £35m over the Stanley Park stadium project.

On top of that, £8.4m went in pay-offs to staff, including Hodgson and former managing director Christian Purslow.

New England boss Hodgson was sacked by Liverpool in January 2011 after 191 days in charge.

The figures do not include a £25m kit deal signed with Warrior Sports.

And current managing director Ian Ayre insisted that, despite the losses, the club is in good shape.

"I think what today's accounts show is that we have gone through a phase in the last year which has involved a cleaning up of our accounts and our business," Ayre said.

Previous owners Tom Hicks and George Gillett abandoned established plans for a new ground in Stanley Park on their takeover in 2007, and instead engaged Dallas-based architects HKS to come up with a new 70,000-capacity design.

FSG scrapped that project soon after buying the club, believing it to be unviable, but still had to settle legal, planning and design fees, resulting in the £35m bill.

Ayre told the club website: "That particular design and stadium is not
a viable project for the club, although there was a lot of cost associated with it at that time.

"I think it's important for us to move on from that and move it off the accounts, which is what has happened."

It's a big, big loss. The good news is most of it seems to come from one-off items, that failed stadium project and sacking of Roy.

Although, it has to be said, it's a huge failure to end up spending £35m on a stadium project that gets scrapped before any construction work even takes place!!

Anyway, hopefully we'll improve from here on.

And, well, this just goes to show how important it would be to make it into the Champions League.. *sigh*

by Art Morte Fri May 04, 2012 1:04 pm

In addition, here's the Swiss Ramble's today (4th May) posted piece on Liverpool. It's a longish read, but interesting. Also a little depressing; our finances need improvement is the key message.

http://swissramble.blogspot.com/2012/05/liverpool-keep-car-running.html

by stevieg8 Fri May 04, 2012 3:34 pm

I wasn't worried by this report at all. It seems we would have been reporting a profit if not for a few awful decisions by the previous ownership - and you guys are failing to remember that's INCLUDING the investment we've made in the squad recently. If we have the capability to spend 100 million in a summer and still come out the other side doing well financially, that's an auspicious beginning. Of course we don't have to/aren't a team that's going to do that on a yearly basis, so we'll make this loss back soon enough and be in stable condition.

by Art Morte Fri May 04, 2012 4:12 pm

stevieg8 wrote:I wasn't worried by this report at all. It seems we would have been reporting a profit if not for a few awful decisions by the previous ownership - and you guys are failing to remember that's INCLUDING the investment we've made in the squad recently. If we have the capability to spend 100 million in a summer and still come out the other side doing well financially, that's an auspicious beginning. Of course we don't have to/aren't a team that's going to do that on a yearly basis, so we'll make this loss back soon enough and be in stable condition.

Have to bear in mind that when clubs buy players, they do not place the transfer expenditure on the balance sheet as a one-off purchase. It's done by amortisation whereby: a player is bought for 20m on a four-year deal. The transfer fee will be spread for duration of the deal, so in this example every year for four years you will see a 5m expenditure from that particular deal.

So when we spend £100m in one summer, those monies won't appear in full in expenses in that year's accounts. They will be spread over the following years.

Moreover, we got an unusually big chunk of cash from players sales, mainly Torres and Mascherano. With a more normal profit from player sales we would have made some £20m-30m greater loss.

So there are some challenges. I think it's obvious that we have to either grow our revenue or cut our wage bill. Our current wages-to-turnover ratio is 70% - as shown by the Swiss Ramble - which is probably too high to make it possible to run a Premier League club without posting yearly losses.

by Red Alert Sat May 05, 2012 2:31 am

49m is decent... considering we're not in the CL.

Roy had to go, and so did Purslow. The stadium plans are just a disgrace.

by Art Morte Sat May 05, 2012 6:59 am

I wouldn't consider any sort of loss 'decent' when our owners have said that the aim is for the club to spend just what money it makes.

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