Leeds United: Transfer window will reveal financial reality

BUSY TIMES: The iconic Billy Bremner statue at Elland Road where manager Neil Warnock hopes to greatly strengthen his side in the January transfer window.
BUSY TIMES: The iconic Billy Bremner statue at Elland Road where manager Neil Warnock hopes to greatly strengthen his side in the January transfer window.
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Another year and another profit for Leeds United. According to their latest financial results, the club made £317,000 in the 12 months before July, extending their record of profitability into a fifth consecutive year.

Part of the appeal for GFH Capital, the firm which bought Leeds last month, was the fact that the business consistently makes money.

Profits are a rarity among professional football clubs, in this country and abroad. But the company’s belief that United are constrained by cash-flow issues is borne out in the figures published last week.

The club’s overall profit of £317,000 was registered despite an operating loss of more than £3.3m. The initial figure includes money earned through transfer fees and the latter does not. United made an operating profit of nearly £1m during the 2010-11 financial year, constituting a downward shift of £4m in the space of 12 months.

The reasons for the weakening of their financial position were adequately outlined. Gate receipts in 2011-12 fell 10.6 per cent year-on-year – £1.3m in cash terms – and the club’s turnover dropped by more than £1.5m. In short, Leeds are pulling in less money than they were from sources unrelated to player sales. Their overall profit was intrinsically linked to fees earned through the transfers of Max Gradel and Jonathan Howson.


Salem Patel, a board member at GFH Capital and one of United’s new directors, touched on that fact after the company finalised its takeover on December 21.

“Looking at the business from a profitability aspect, the club is making money,” Patel said. “Not many clubs in the Championship can say that. But looking from a cash-flow perspective, which is something I feel a lot of fans don’t do, that is where you see an area of weakness.”

The prompt release of United’s financial results, which revealed that the club’s parent company lost more than half-a-million pounds in the last financial year, underlined Patel’s argument. The following day he tweeted: “LUFC’s finances highlight why everyone needs to work together to make this club great again.”

As Leeds and GFH Capital head into 2013, the strategy of United’s new owners appears to be two-pronged – to give the team a more magnetic appeal and to claw back the missing pounds.

The key to the success of United’s squad, at least in the short term, is the transfer window which opened this morning.

Leeds pre-empted January by agreeing a new contract with El-Hadji Diouf, doubling his £5,000-a-week wage and committing to the signing of winger Ryan Hall on a permanent basis from Southend United.

Alan Tate is expected to remain with United beyond the end of his loan from Swansea City and attempts have been made to bring Stoke’s Michael Tonge back to Elland Road this week.

Where Jerome Thomas is concerned, it is not yet clear whether West Bromwich Albion will play ball with the request to leave him in Yorkshire for the rest of the season.

United manager Neil Warnock placed much importance on that spate of negotiations but it is the additional transfers sanctioned and financed by GFH Capital which will dictate the mood of the supporters who the Dubai-based company seek to impress.

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A new striker is top of Warnock’s wish-list but he revealed on Saturday that West Brom’s Chris Wood – destined for a £1.25m move to Leicester City – had strayed beyond his spending power. “I just can’t compete financially with Leicester,” said Warnock, an admission that the recent takeover of Leeds has not made him filthy rich.

The message of successive defeats to Nottingham Forest and Hull City was that more than a new forward is needed.

In what could yet be his last season as a manager, the January market is Warnock’s opportunity to bring promotion into view. It might also reveal exactly how much support GFH Capital is willing to give a manager whose contract expires at the end of this term.

Warnock has won promotion seven times and would set a Football League record by winning an eighth. GFH Capital came to Leeds with a clear understanding of how much the club stand to earn by tapping into the ever-increasing pool of broadcast money in the Premier League – worth upwards of £60m to each top-flight team from next season – but Patel was at pains to stress that the company’s strategy was not dependent or based upon the prospect of Premier League income.

“Any new owner or any existing owner of a football club that is in the Championship or in the divisions below has the dream to go into the Premier League,” Patel said. “Financially it’s the place to be. That is where we hope to take the club to.

“But our business model is not predicated on the club being in the Premier League.”

GFH Capital also seem fixated on the task of arresting the deteriorating relationship between the club and their fan base. One of the company’s first acts following the completion of its takeover was to create half-season tickets, beginning with United’s game at home to Bristol City on January 19.

The cost of tickets for an adult ranges from £255 to £329 and the scheme is GFH Capital’s first response to a fall in gate receipts of 10 per cent. United’s average attendance is down again this season, standing at 21,398, though their income has been helped by five Capital One Cup ties at Elland Road, including their televised quarter-final against Chelsea. The crowd of 33,816 which turned out for that fixture was United’s highest for almost two years.

More significant was the fact that GFH Capital’s takeover led to the biggest league crowd of the season against Middlesbrough 24 hours later, an increase of 6,000 in the space of eight days. This afternoon’s meeting with Bolton Wanderers and the visit of Bristol City will give some indication of whether the impact of the takeover was a one-off bounce but GFH Capital has spoken repeatedly about “re-engaging” with supporters and generating an inclusive atmosphere at Elland Road.

Leeds rely heavily on the income generated by their large support to keep their accounts in good health. While United’s wage bill for players and management staff is almost £13m, it represents less than half of their turnover in percentage terms. Sheffield Wednesday, who announced an operating loss of £4.9m last week, pay £8.3m in salaries from a turnover a third as big. In gate receipts alone, Leeds earned more than Wednesday’s entire income during the 2011-12 financial year.

“The fanbase is fantastic,” said club director David Haigh on the day of the takeover. “Not just in Leeds but around the world. that’s what makes the club so special.”

It would seem that the club’s rank and file are at the centre of GFH Capital’s vision for a profitable future and a prosperous new year. That, at this club, is half the battle.

Leeds United head coach Thomas Christiansen. 
(Picture Jonathan Gawthorpe)

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