Future Business Model - Can we ever get back in the black?
Thu Jun 07, 2012 4:19 pm
There has been much debate about how the £100 million investment and whether we can ever realistically turn our estimated £12 million a year loss into a sustainable year on year profit.
Clearly most of us (including me) lack the required insight into the clubs accounts and as yet we do not understand how the rebrading is intended to positively impact our future revenue streams. Therefore, it is very difficult to predict where the club will be in future years in terms of our profit or loss.
What is clear however, is that a lot of people are making some pretty wild assessments of the situation, and their seems to be a clear split between the fans with totally opposing views with regards to both the investment and the rebranding.
Perhaps then, it's now time to start to think sensibly about how the club could generate more money and to think logically whether there is genuine potential to make this club a successful profitable club.
Lets start with the existing revenue streams and costs:
My rough estimates are as follows:
Costs
- Current squad costs (basic salaries + HMRC + bonuses - £14 million
- Other staff costs (inc directors and Malky) - £4 million
- Transfer costs (transfer fees, signing on fees, agents fees) - £3 million
- Other day to day running costs (policing, acedemy, marketing, etc) - £3 million
- Loan servicing or debt provision (any interest, legacy loan costs) - £1 million
Approx Total = £25 million
Revenue
- Season Tickets - £5.5 million
- Match day ticket revenue (23 league games + 6 cup & friendlies) - £3 million
- Other match day revenue - £1 million
- Club shop and merchandising & advertising - £2.5 million
- TV and Championship revenue - £2 million
Approx Total = £14 million
These are all approx figures, but this would indicate why we are currently losing approx £1 million per month.
If this is where we are currently, what can we expect going forward? My thoughts are that nothing much will change unless we get promoted to the PL, or we start to sell assets and make a conscious effort to reduce our costs. It appears the second option is not being considered and costs are actually likely to increase, so where could the increased revenue come from?
Lets jump ahead 2-3 years time and assume the following;
- The existing squad has increased significantly in value compared to the aquisition costs (Mason, Turner, Ralls, Harris, Gunnerson, etc have mostly increased in value) so our current squad will be worth more
- Malky used his increased transfer kitty wisely and purchased 6-7 promising younger players that now have a higher resale value
- We have a top notch training acedemy in place with an increased pool of youth talent pushing for a squad place
- We have no legacy debts to service
- We have been promoted to the PL
- Our average attendence is 30,000 in our increased capacity stadium
- PMG have been paid off and the club now earn an income from the Premier seating + the food and drink outlets
The above could be achieved and this is clearly the intention. Therefore, what benefits could this provide in terms of revenue?
- Season ticket and match day revenue - £12.5 million
- Food & Drink revenue - £1.5 million
- Club Shop revenue & merchandising could increase by approx - £2 million
- TV, PL + cup prize money - £43 million
- Shirt sponsorship - £5 million*
- Stadium naming rights (hopefully not still part of the Lagstone settlement - £2 million pa *
- Other advertising revenue could increase by - £2 million pa *
- Annual player sales (net profit) - £5 million **
- Overseas TV revenue via any deals that Tan may broker via his far East TV links - ???
* this is where the malaysians are looking to exploit the Chinese markets and attract sponsors and additional investors
** assumes that we sell players for £5 million pa more than paid for them
Approx total Revenue in 2014/2015 - £73 million
Additional Costs
- Squad costs (basic salaries + HMRC + bonuses - £40 million
- Other staff costs (inc directors and Malky) - £5 million
- Transfer costs (transfer fees, signing on fees, agents fees) - £15 million *
- Other day to day running costs (policing, acedemy, marketing, etc) - £4 million
- Acedemy Costs - £2 million
- Overseas Development Costs - £1 million
- Marketing - £0.5 million
- Miscellaneous (travel, accomodation, scouting costs, etc) - £1.5 million
Total Costs = £67 million
* transfer costs unlikely to be so much after the first 2-3 years of the being in the premiership because the biggest cost will be in the first 2 years as a result of having to put a PL squad together. More home grown talent should also be available to progress into the squad or to sell on to balance the books.
Net Profit - £6 million (increasing to approx £10 million pa once a PL squad is established)
This may appear to be a fairly modest annual profit for £100 million investment, but when you then factor how much the club would then be worth in the PL (assuming the £100 million investment funds promotion to the PL), with no debts and an annual profit, it then starts to make sense.
Total Value of Club in 2-3 years
Most clubs are devalued because they have substantial debt that new owners need to take on, or they are making annual losses. If we are profitable in the premier league and establish ourselves, the club will be worth well in excess of the £100 million the Malaysians will have invested, plus it would also attract additional investors if this is a consideration.
The playing squad could be worth any where between £25-£50 million if we build a squad to get to the PL. The real estate (ground, plus anything that PMG have not ripped from the club) could be worth in excess of £50 million and more importantly Cardiff City, the brand and the club as a whole could be worth well in excess of £100 million in total.
The only potential flaw is that we have to gain promotion and this is my concern. How long will the owners be prepared to absorb year on year losses before they jump ship??
The old saying goes that you should never gamble more than you can afford to lose. Thankfully, at least VT can afford to lose, however unpalatable failure may be to him.
Clearly most of us (including me) lack the required insight into the clubs accounts and as yet we do not understand how the rebrading is intended to positively impact our future revenue streams. Therefore, it is very difficult to predict where the club will be in future years in terms of our profit or loss.
What is clear however, is that a lot of people are making some pretty wild assessments of the situation, and their seems to be a clear split between the fans with totally opposing views with regards to both the investment and the rebranding.
Perhaps then, it's now time to start to think sensibly about how the club could generate more money and to think logically whether there is genuine potential to make this club a successful profitable club.
Lets start with the existing revenue streams and costs:
My rough estimates are as follows:
Costs
- Current squad costs (basic salaries + HMRC + bonuses - £14 million
- Other staff costs (inc directors and Malky) - £4 million
- Transfer costs (transfer fees, signing on fees, agents fees) - £3 million
- Other day to day running costs (policing, acedemy, marketing, etc) - £3 million
- Loan servicing or debt provision (any interest, legacy loan costs) - £1 million
Approx Total = £25 million
Revenue
- Season Tickets - £5.5 million
- Match day ticket revenue (23 league games + 6 cup & friendlies) - £3 million
- Other match day revenue - £1 million
- Club shop and merchandising & advertising - £2.5 million
- TV and Championship revenue - £2 million
Approx Total = £14 million
These are all approx figures, but this would indicate why we are currently losing approx £1 million per month.
If this is where we are currently, what can we expect going forward? My thoughts are that nothing much will change unless we get promoted to the PL, or we start to sell assets and make a conscious effort to reduce our costs. It appears the second option is not being considered and costs are actually likely to increase, so where could the increased revenue come from?
Lets jump ahead 2-3 years time and assume the following;
- The existing squad has increased significantly in value compared to the aquisition costs (Mason, Turner, Ralls, Harris, Gunnerson, etc have mostly increased in value) so our current squad will be worth more
- Malky used his increased transfer kitty wisely and purchased 6-7 promising younger players that now have a higher resale value
- We have a top notch training acedemy in place with an increased pool of youth talent pushing for a squad place
- We have no legacy debts to service
- We have been promoted to the PL
- Our average attendence is 30,000 in our increased capacity stadium
- PMG have been paid off and the club now earn an income from the Premier seating + the food and drink outlets
The above could be achieved and this is clearly the intention. Therefore, what benefits could this provide in terms of revenue?
- Season ticket and match day revenue - £12.5 million
- Food & Drink revenue - £1.5 million
- Club Shop revenue & merchandising could increase by approx - £2 million
- TV, PL + cup prize money - £43 million
- Shirt sponsorship - £5 million*
- Stadium naming rights (hopefully not still part of the Lagstone settlement - £2 million pa *
- Other advertising revenue could increase by - £2 million pa *
- Annual player sales (net profit) - £5 million **
- Overseas TV revenue via any deals that Tan may broker via his far East TV links - ???
* this is where the malaysians are looking to exploit the Chinese markets and attract sponsors and additional investors
** assumes that we sell players for £5 million pa more than paid for them
Approx total Revenue in 2014/2015 - £73 million
Additional Costs
- Squad costs (basic salaries + HMRC + bonuses - £40 million
- Other staff costs (inc directors and Malky) - £5 million
- Transfer costs (transfer fees, signing on fees, agents fees) - £15 million *
- Other day to day running costs (policing, acedemy, marketing, etc) - £4 million
- Acedemy Costs - £2 million
- Overseas Development Costs - £1 million
- Marketing - £0.5 million
- Miscellaneous (travel, accomodation, scouting costs, etc) - £1.5 million
Total Costs = £67 million
* transfer costs unlikely to be so much after the first 2-3 years of the being in the premiership because the biggest cost will be in the first 2 years as a result of having to put a PL squad together. More home grown talent should also be available to progress into the squad or to sell on to balance the books.
Net Profit - £6 million (increasing to approx £10 million pa once a PL squad is established)
This may appear to be a fairly modest annual profit for £100 million investment, but when you then factor how much the club would then be worth in the PL (assuming the £100 million investment funds promotion to the PL), with no debts and an annual profit, it then starts to make sense.
Total Value of Club in 2-3 years
Most clubs are devalued because they have substantial debt that new owners need to take on, or they are making annual losses. If we are profitable in the premier league and establish ourselves, the club will be worth well in excess of the £100 million the Malaysians will have invested, plus it would also attract additional investors if this is a consideration.
The playing squad could be worth any where between £25-£50 million if we build a squad to get to the PL. The real estate (ground, plus anything that PMG have not ripped from the club) could be worth in excess of £50 million and more importantly Cardiff City, the brand and the club as a whole could be worth well in excess of £100 million in total.
The only potential flaw is that we have to gain promotion and this is my concern. How long will the owners be prepared to absorb year on year losses before they jump ship??
The old saying goes that you should never gamble more than you can afford to lose. Thankfully, at least VT can afford to lose, however unpalatable failure may be to him.
Re: Future Business Model - Can we ever get back in the black?
Fri Jun 08, 2012 12:09 am
interesting, but unless you know the facts it means nothing this is purely guesswork.
Re: Future Business Model - Can we ever get back in the black?
Fri Jun 08, 2012 12:44 am
It's far too late to be reading and digesting all those figures, but fair play to you for having a go! 
Just a little input from me though and from reading between the lines of other far more itk posters on here than me, then I'd say our turnover is around £20 million each year!
We've been spending around the same on players wages, staff and many other things that go to run a football club, which means that we're effectively spending around about what we earn!
However, the Malaysians took over a club with a big historic debt and once VT buys out Langston etc., turns the debt into shares (equity), we'll be debt free and able to survive far more easily and fall in line with the new fair play rules!
Just a little input from me though and from reading between the lines of other far more itk posters on here than me, then I'd say our turnover is around £20 million each year!
We've been spending around the same on players wages, staff and many other things that go to run a football club, which means that we're effectively spending around about what we earn!
However, the Malaysians took over a club with a big historic debt and once VT buys out Langston etc., turns the debt into shares (equity), we'll be debt free and able to survive far more easily and fall in line with the new fair play rules!