The Mail yesterday reported that the tax payer might be called upon to bail out ailing Derby County. That said, the Mail today said that the French are stopping us having Christmas this year and that Brexit is going swimmingly, so who knows… Whatever, the report caused a lot of indignation, not least from myself. I’d be pretty hacked off if my taxes supported a failed commercial enterprise that chose to pay no fewer than 5 players plus the manager over a million last year, when we can’t afford to fund the NHS properly. ”Or fix bloody potholes!” yells the cyclist part of my brain.
I lay my cards on the table here and concede that I’d hate Derby to go out of business. We’ve got history (see previous posts for shock confession!). They should, for me, pay their debts and be punished for what is possibly cheating and at least ‘bending the spirit’ of Financial Fair Play in their craven bid for the golden, sunlit uplands of the Premier League. And, let’s not forget, other clubs have suffered as a consequence, notably Wycombe and Sheffield Wednesday.
It’s hard to pick your way through Derby’s finances - investigative website The Price of Football, neatly describes the 2018 accounts as “enigmatic”. I can’t fathom it all but the headlines seem to be:
A labyrinthine set-up of companies controlling the club with holding companies within holding companies. It’s valid and legal but it muddies the waters. Conveniently?
Derby have done well from TV money (broadly similar to Forest) towards the top end of clubs not in receipt of parachute payments, who swamp everyone else by a factor of about 6.
Matchday income has been relatively static - a consequence of a consistently full Pride Park, I suppose - but a relative piss in the ocean at 9 million (2018) compared to say Arsenal‘s 96 million in 2020. Spurs, United and Liverpool were all there or thereabouts too. Derby compared almost exactly with Watford, the 4th lowest.
Commercial revenue took an interesting leap in 2017. A 50% increase, which caused cynics to question whether this was real or actually income for other companies related to a certain Mel Morris. 12 and a bit million there, though again peanuts by comparison with the bigger Premier League clubs, all around 200 million. Comparable really only to Bournemouth and Huddersfield that year.
Total revenue then (remember, this is 2018) of 29.1 million, the second highest in the Championship if you exclude clubs with parachute payments. Only Leeds were higher at 40.7 million. Forest, for comparison were on 22 million. Bristol City (!), Wolves, Villa and Norwich were the others above Forest btw.
Derby’s problem has, of course, been in chasing the dream with big money signings. Wages in 2018 (for parent company Sevco 5112) were 46.8 million. For context, this was the 6th highest in the Championship, broadly in line with the clubs who had received parachute payments and only really outstripped by Villa (a whopping 73 million). Forest were at 28.6 million. Another widdle in the Pacific compared to the Premier League, where the top 4 were around 300 million and the lowest (Huddersfield) 64 million.
Transfer fees were another massive issue for them. For accounting purposes, these are spread over the duration of a player’s contract. This is called ‘amortisation.’ Derby, by all acocunts, have (had) a singularly unique Melenomics way of doing this, which made their wage bill low, suspiciously low, for accounting and FFP purposes; right between Bristol City and Brentford, well into the bottom half of clubs, which seems a bit odd considering the players they bought and the wage bill.6.5 million there, compared to Forest 2.0 (very near the bottom) and Boro at the top (24.5 million).
If you put wages and this amortisation together, Derby had expenses of 53.3 million against that revenue of 29.1 million.
I’m no accountant, but I know there are other costs: rent, utilities, depreciation to name but three of hundreds. Derby’s accounts reported miscellaneous other costs of 19 million, with no explanation. Costs totalled 76 million.
All in all then, mahoosive losses, which led to the sale of Pride Park to Mel Morris, or rather another part of his empire. This generated a ’profit’ of 40 million, bringing the club back into the allowable limits of loss under FFP. Of course, this is the equivalent of me selling my half of the house to Mrs Zagger and filing accounts that say we’re better off by that much. Or the right hand passing money straight to the left. This prevented points docking, of course. These losses were reported on the club website as a profit of 14.8 million. How‘s that? Well these were the part of the accounts relating only to Derby County Football Club Limited and disregarded the costs incurred by parent company Sevco 5112, who actually had a loss of 46.8 million.
Such huge losses are usually mitigated by sales of assets - namely players. Here, Derby brought in a mere 3.8 million profit (Forest 10.1 for comparison). Not much impact there.
All in all a bleak picture. Accountants talk of EBITDA (Earnings Before Income Tax, Depreciation and Amortisation as a reliable figure for profit. Derby’s loss was 36.4 million. Remember they reported a profit of 14.8. This amounts to over 700,000 a week.
It’s a mess, perhaps deliberately so. I can’t even pretend to ‘get’ it all and I’ve relied on a number of sources for laymen here, including the aforementioned Price of Football. It’s hard not to conclude that Derby tried to screw the system in pursuit of the dream. That, for me, makes a tax-payer bail out a complete no-go and the leadership have to be accountable. It’s sad for the fans and any staff who’ve lost out as a result, but they’d have presumably enjoyed reaping the rewards if it had all come off and, it has to be said, were quite ‘in yer face’ about it all when things looked rosy. All that ’banter’ Forest have taken over the years about the ground being owned by the Council looks a bit sad now!
Still, on balance, I’d prefer not to see them go though. Others will disagree…
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