Expert Kieran Maguire analyses Leeds United finances, how they compare in Championship and what they could leverage in Premier League

Leeds United exceeded expectations when it came to generating income in the 2018/19 financial year according to a football finance lecturer.

Thursday, 16th April 2020, 5:50 am
MODEST: Football finance expert Kieran Maguire says Leeds United's losses are modest in the Championship but if they don't get promoted they may need to cut back

But while Kieran Maguire, author of The Price of Football and co-host of the podcast of the same name, believes owner Andrea Radrizzani has ‘pushed the boat out’ to back Marcelo Bielsa, he warns that the club may need to bring it closer to the shore again if promotion is not achieved this season.

The Whites’ accounts came out last week and showed a £21.4m loss, a dramatic increase from the £4.3m lost the previous financial year.

All revenue streams across the business were up year on year, and turnover rose by £8.3m.

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“I think in terms of income generation they’ve done as much as anybody could have hoped for in that they’ve probably exceeded expectations,” said Maguire.

“So that’s a positive.”

And in more good news, Maguire believes the club have been ‘smart’ with all the events and merchandise that they delivered on the back of the 100th anniversary, which will boost the money coming in during the current financial year.

Where the money is going out, in considerable sums, is on the playing side of the club.

The last financial year saw a significant rise in spending on wages – a necessary evil when attempting to negotiate a departure from the Championship.

“Money was spent on the manager and his team,” said Maguire.

“There’s no disrespect to previous manager Paul Heckingbottom but Bielsa would not have come cheap.

“They backed him.

“The additional money went on player costs.

“The wage bill went up by over 50 per cent.

“The wages were £46m and the income was £49m, which doesn’t really leave a lot of money for anything else.”

Although Leeds’ backing of Bielsa was not just evidenced by the sums of money being paid to players and staff in wages, but by cash spent on bringing new players to the club, Maguire says they have boxed clever in that regard, financially.

“There was an investment in players,” he said.

“Leeds are actually pretty good, if you take a look at them over the last four or five years, every time they’ve bought a player they’ve effectively funded it by selling others.

“The net investment was zero but they still spent £16m on players and the previous year they spent £28m, so the club owner is prepared to back managers in the market.

“Last season they were within touching distance of promotion on the back of that.”

They find themselves, with nine games remaining in a Championship that has been suspended indefinitely owing to the coronavirus pandemic, within touching distance of promotion once again. It’s unthinkable, for so many reasons, that they will endure the same heartache again at the end of Bielsa’s second season in charge, whenever it finally comes to conclusion.

Financially, promotion is vital.

“I think [Leeds’ financial model] has a limited shelf life in terms of being sustainable, in the sense that there is this elephant in the room in the form of financial fair play limits,” he said.

“Leeds did very well in 2017 and 2018, their losses were very modest.

“But the 2019 losses were £20m compared to £4m. They’ve still got some wiggle room in 2020 but you wouldn’t want them to be still seeing promotion in a year’s time.

“I think they might need to cut back if they didn’t go up.”

Leeds are not alone in spending big money to try and climb out of English football’s second tier, it is a division that has become known for vast expenditure.

But Leeds are, at least, run in such a way by the current regime that mitigates some of the losses. That is not the case across the division.

“They are pretty modest by Championship standards,” said Maguire.

“The losses in that division are just ridiculous.

“The trading losses were over £600m and the only way to cover those losses is through player sales, which would probably cover about a third of it, or you’re relying on owners to put money into the club.

“Relatively, I would say Leeds are one of the better-run clubs in that division.

“On an absolute measure, they’re still losing money. But, in my, view they certainly, during the first part of the decade, lived within their means. Mr Radrizzani has pushed the boat out with a view to getting promoted and he’s backed Bielsa.

“By all sane means they should be promoted this season, they are clearly one of the two best clubs in that division by a street.”

The Championship rat race is motivated by two things – prestige and pound coins.

Leeds United want to return to the top flight because it is where their fans, players, owner and staff all feel their clubs belongs.

They are, without question, a club of a significant enough size and stature, never mind history, to boast and, with good management, sustain Premier League status.

Promotion would also be worth £200m, according to Radrizzani.

It would open up new revenue streams and supercharge the comparatively meagre income they currently enjoy from appearing on live television on a very regular basis.

But a place in the Premier League does not mean they would not have to be prudent or that they could let up on their aggressive pursuit of revenue – Radrizzani and his chief executive, Angus Kinnear, have majored on maximising the club’s earning potential through major sponsorship deals, bumper ticket sales and retail.

Simply put, Leeds could not afford to take their eye off the commercial ball just because Premier League television money was rolling in and every seat in Elland Road was sold out.

Precedent shows that gaining access to the best league in the land is certainly worth your while, but it does not come cheap.

“It does normally [make money problems go away], for at least 12 months but then we can quite quickly return to having financial challenges,” said Maguire.

“If you take a look at Brighton and Hove Albion, they were promoted in 2017 and made a profit in 2018 but then started making £20m of losses in 2019.

“The view of the Premier League as being paved with gold in terms of huge amounts of wealth – there certainly would be far more money coming in, and I think Leeds, as a brand, I don’t like to use the word but you have to, they have got a number of positives.

“It is a big city, it does have fans scattered around the world and I think they’ll be able to leverage off that. But you will find the costs ramping up very, very quickly and the wages will shoot through the roof.”

Your interpretation of Leeds’ finances likely depends on whether your piggy bank is half full or half empty.

The revenue figures are the positives, the losses and the reliance on an owner’s cash are the negatives.

No one needs a calculator to work out the importance of promotion.