"Phenomenal for a non 'big six' club" - expert details Leeds United accounts, profit and potential - YEP 7/4/22

Leeds United's 2020/21 accounts show an operating profit of £5.5m and a set of results that 'surpass expectations' in the eyes of football finance lecturer Kieran Maguire.

By Graham Smyth

The Whites are one of only two of last season's Premier League clubs to have reported a profit, from the 16 to have published their financial accounts to date.

Last year Leeds reported an operating loss of £64m and although their wage bill and transfer spending went up significantly for the 2021 accounts, Premier League income helped boost turnover from £54m to £171m.

Key to that were the top flight's central payments of £110m, broadcast revenue of £22m and record sponsorship and commercial deals with SBOTOP and Adidas.

Regardless of the riches made accessible by continued Premier League status, Maguire is impressed with Leeds' financial management as a club trying to stay amongst the elite.

"I quite like the way the club has protected itself from the worst of the Premier League because right at the very end it talks about bonuses that are paid if they avoid relegation," he said. ‘The wage bill is high but it would have been a lot lower had the club gone down - £35m of the wage bill appears to be relegation avoidance bonuses and that's going to hit £48m this year, so it's quite the insurance policy, the way the club operates itself.

"Premier League status can do wonders for you but Leeds is now the 16th club to have published accounts for 2021 and only two of them have made an operating profit - only Leeds and Sheffield United made money last season.

"Sheffield United were in their second season of Premier League football and they were relegated. I suspect that if they'd finished 17th they might have made a loss because they would have paid significant relegation avoidance bonuses."

What the accounts show, yet again, is that Leeds United have an incredibly high ceiling if they can establish themselves as a club vying for European football. That's the dream that has been laid out by majority owner Andrea Radrizzani and his partners, 49ers Enterprises.

"The potential for Leeds is significant because it does have a brand in its own right, which it had in the Championship and not many clubs that come up have that," said Maguire.

"Commercial merchandise income can certainly increase going forwards because they had a successful first season on the pitch. "£20m in that regard is phenomenal by a non big six club. That does show that if Leeds have a good season and got into Europe the numbers would rocket further.

"As far as gate receipts go, they were £2m in these accounts - you'd expect them to go close to £20m for a full season. Catering income was also hit, that would be another £5m. I'd expect revenue to rise from those two sources to the thick end of £25m for a full season in the Premier League.

"The broadcast income is linked to final position so that will be geared by where Leeds finish this season but they're not going to go down, are they? The last two or three results have ensured that, so that gives them the security to plan ahead."

The accounts show a wage bill hike from the £78m reported last year to £108m, with an average weekly wage of £55k, and administrative costs at £152m.

They also spent £99m on transfers and borrowed £63m, but Maguire is not alarmed by the club's level of debt.

"To spend £99m in your first year in the Premier League for 16 years is much higher than we've seen from other clubs who have been promoted, with the exception of Aston Villa," he said.

"£99m is a lot of money. They did borrow, but £20m of that I suspect has come from the 49ers. The club is a little bit vague, it talks about related parties, so it will either be Radrizzani or the 49ers. You'd expect a club to have to borrow to provide some funding when it gets to the Premier League. The level of debt, by Premier League standards, is negligible and very much sustainable - my club Brighton, we owe the owner something like £340m.

Maguire suspects a sum of £21m in 'waived loans' will be money written off by Radrizzani as part of the deal to increase the 49ers' involvement in the club although he calls it a 'cosmetic exercise.'

One of the more intriguing aspects of Leeds' accounts is the disparity between their estimation of Covid costs - £23m - and Everton's estimation of £170m.

"Aston Villa's estimate was about £60m over two seasons, Sheff United's was much lower and then we've got Everton," said Maguire.

"I think what they were claiming was that Covid hit them hard in terms of the ability to sell players. If they believe they maybe would have been able to sell Cenk Tosun for £60m in a non-Covid environment that's their call. I think as a football fan we might have an alternative opinion as to why they didn't have significant player sales, because their recruitment was poor. The Everton figures have raised many an eyebrow. They're an outlier rather than Leeds."

Although the Premier League table looks rosier for Leeds than it did just a few weeks ago, they are still not mathematically safe from the drop. Relegation would be a disaster on many fronts but Maguire's 'beer mat calculations' suggest it would not be financially catastrophic thanks to their self-insuring policy on relegation bonuses.

In all, he sees a sensibly-run club.

"The club has been cautious and has not gambled as we have seen some do historically," he said.

"These results surpass expectations and there is an element of conservatism. The fact that they've got these relegation avoidance bonuses shows a club that clearly aimed for survival and by finishing top half that boosted results significantly and gave balance to the hit created by Covid.

"In a Covid year, with all the costs of promotion and the gambles you take, they've got to be seen as a good set of results."