Creating a Sustainable League of Ireland

How to create a sustainable League of Ireland?

What do I mean by sustainable?

I am never seen anyone put on paper a plan to improve the league and make it sustainable. Nothing from the FAI or the clubs, personally I think the clubs need to drive it more as it's more key to us than anyone. So here is my personal opinion on where we are and where we could go with state help for a short term of time and using that help in the right areas.

When I talk about a sustainable model, I mean that clubs have enough income from football sources to pay their bills and make long term plans for 3 to 5 years with some level of certainty. Benefactors investing is great and should be welcome but as a league our top division should be full time professional offering jobs to 400 to 500 people from sustainable income. If we cannot do this from gates, commercial, grants, transfers, prize money etc then we will continue to have a league that implodes from time to time when benefactor money runs out. The 2000's was a great example of that when we had a lot of full time clubs, none of which were sustainable.

Background

This September is the 100th anniversary of the formation of the league and due to the short season in the 2000's we are now in the 101st season. Over the 100 years we have not yet managed to build a sustainable professional league in this country. We have had periods of professionalism which have all ended with the clubs involved going bankrupt, going out of business or dropping to lower leagues. 

Going back to the 1940's Cork United/Athletic won 7 of the 11 leagues between 1940 and 1951. They eventually folded due to running out of money so while they were very successful in the short term they didn't survive to enjoy that success.

The next period of continued domination was Waterford from 1965 to 1973 where they won 6 out of 8 leagues. Thankfully Waterford still exist having had many owners since but have rarely come close again and have struggled with debts at various times since.

After that came Shamrock Rovers of 1983 to 1987 who were probably the most dominant team of any era winning 4 leagues and 3 cups having signed some of the best LOI players from other teams. However like the 2 clubs above that model wasn't financially sustainable and ultimately their home ground was sold and they spent 2 decades on the move until they arrived in Tallaght.

In the 2000's Shelbourne and Bohemian FC had their most successful periods. Shels won 5 leagues between 1999 and 2006 while Bohs won 4 leagues between 2000 and 2010. What happened then? Shels have largely been a division 1 side since and lost Tolka Park after selling it to developers to fund said wins and Bohs lost Dalymount after selling it to developers to fund said wins. DCC ultimately bought both grounds and as for their future, time will tell.

Since then the dominant team has been Dundalk who have won 5 titles between 2014 and 2020. What was different about them was between 2014 and 2017 they had this dominance while not losing money, however since then they have lost a lot of money trying to sustain their position. Their immediate rivals in this era were Cork City and Shamrock Rovers, who while both had some success on the pitch, have lost a lot of money trying to keep up with Dundalk. Ultimately Cork have been relegated and looked to sell themselves but thankfully they don't appear to have a significant debt overhang.

League of Ireland - Current Reality

Today I would say there are 2 full time professional sides in the country, Shamrock Rovers and Dundalk FC. Neither of these can afford this model from the money they bring in from football activities. There are then a lots of  semi professional sides who pay 40/43 weeks and in that time are professional and then there are clubs that pay 40/43 weeks but the players also have day jobs. So a mixed bag of a league.

Over the period 2014 to 2020 there were 3 teams generally in the top 3 of the league and winning cup finals and were full time. They were Dundalk, Cork City and Shamrock Rovers. By being at the top these teams have secured the European money which compounds their financial advantage. But even that advantage hasn't stopped cubs running up losses and Cork City having serious issues.

Dundalk won 5 leagues and 3 cups,

Cork won 1 league and 2 cups,

Shamrock Rovers won 1 league and 1 cup with St Pats winning the other FAI cup back in 2014.

The table below shows the P&L's of these 3 clubs over that period;

Dundalk were making money in 2014 to 2017 while winning trophies. This was helped by the 2016 Euro run but even without this run the club was well run on and off the pitch. Since Peak 6 bought the club, the success has continued but the losses have increased significantly. 2020 was another good euro run but those profits were eaten up by Covid losses and a big wage bill. Dundalk as it stands today would be a heavily loss making club on an annual basis unless it reached the Euro group stages. And that is fine as long as their owner will prop up the losses, the challenge arises when the owner can't/won't.

Cork City looked like the a good model as a fully owned members club. They were successful on the pitch and made money every year bar a small loss in 2018. They haven't filed 2019 or 2020 accounts yet so hard to know when/where things went wrong, but were relegated at the end of 2020 and its reported they had built up debts etc. They did look to sell themselves to Trevor Hemmings but that has gone quiet. As a fully owned members club a couple of bad years with no cash reserves and a drop in income can lead to problems.

Shamrock Rovers are the current league champions. Over the last 7 years they have accumulated football losses of circa (€3.7m) (probably more when they file their 2020 academy accounts). They have funded these losses by a €2m investment from Ray Wilson and a further €2m investment from Dermot Desmond. In return they have sold 50% of their club to these investors. Like Dundalk running these losses is fine as long as someone will invest to cover them, the challenge arises again when said investment runs out. 

While the Rovers losses look big they are not unusual, plenty of other clubs have run up losses backed by investors in this period, St Pats (€3.5m losses over 7 years funded by benefactor), Derry (stg £1.2m losses over 6 years funded by benefactor), Waterford (€1.2m losses over just 3 years) and Limerick (€2.2m losses over 5 years funded by benefactor) would be 4 of note. So its the norm as such to run up losses in the league. In 2 of these clubs these investors after a few years of losses have run out of money or cut their losses voluntarily which highlights the risk of being dependent on this type of model. 

Clubs running losses like any business running a loss is fine if you have a path to profitability. No club here has ever developed that path and as a result we don't have a club like Juve/Bayern/Celtic etc winning 7/8/9 titles in a row as clubs run out of money before they can do that.

Future Financing of the League of Ireland

Step forward the Irish state. The Irish state currently funds lots of sports in Ireland at all levels but gives close to zero to League of Ireland football (does it give anything ?). From the well known horse racing support (€65m per annum) and greyhound support (€20m per annum)  to Sport Ireland funding various elite programs across the country lots of sports are financially supported. GAA players get circa €3.7m in state support. The state should support everything I mentioned above and give even more support given the benefits of sports in terms of viewing and participation.

The League of Ireland is no different in needing financial support. Based on how little support we have gotten from the state over 20/30 years we are in an even worse position than most of the sports that are funded. 

Requirement

To help football develop proper systems here we need circa €17.5m of investment per annum for 10 years, so €175m (that's probably not even thinking big :)). 

Of this circa €7.5m per annum should go into facilities that can be used by the league of Ireland clubs but also the local communities in which they are in. This €75m investment over the decade will step change the facilities that clubs use. (pitches, gyms, meeting rooms etc). The UK government gave stg£31m a year to clubs after the Taylor report in the 1990's to help clubs modernise stadiums through the football trust. Even these massive clubs needed state help to improve facilities and we are no different.

Secondly circa €6m per annum should go to running the academy model. It sounds a lot but it is circa €300k per club per annum. (There should be a tiering and matching funds principle here I think) This will allow clubs to hire coaches, invest in education schemes etc and really be able to put the hours required into training what we want to be elite athletes. Based on the clubs above there are circa 2,000 kids at various age groups playing in the league of Ireland. Even more at these same clubs with teams below U14's. Most of our future Irish internationals will come through this pathway at some stage especially as more players are currently staying here until 18.

Lastly the remaining €4m per annum should be spent in prize money/grants in the league. We need a professional league here, we need a pathway for these players to be able to make careers here after U19. Having a bigger prize pot or grant pot will allow clubs to not run such losses and allow them to increase the playing budget sustainably. This should be split where the league winners don't get as big a share in lieu of the European money and allows a competitive league, however the top teams would still get the bigger amounts. (Obviously you can still have clubs going too far but more guaranteed money gives a safety net to players).

How its paid back to the state

The €175m over 10 years sounds a lot but in reality a lot of this is paid or would be paid by football itself. So €17.5m a year would be the cost over 10 years.

Firstly at present the league contributes circa €4/5m per annum in PAYE and VAT to the state. I can only go on various annual accounts filed but I don't believe I will be far off. If we can grow the number of players and coaches etc being paid this money will go higher to say €7m per annum. So in various taxes we would be contributing anything from €50m to €70m to the state over the 10 years, in affect the state are giving us this back for a defined period to build a product where in the future they can get the €7m with a far lower contribution.

In terms of the capital expenditure, the state will recoup VAT on the projects as well as PAYE etc on the people working on building the facilities. I can't exactly quantify either but the state will get up to 1/3 of this money back each year in taxes. So another €25m of the funding is covered here.

So of the €175m given by the state the net cost to the state over the decade would be less than 1/2 of that cost. And after the 10 years, the funding would be scaled back, however the PAYE etc would continue to be paid. What the state funding allows the clubs to do is build a proper league with a real pathway for players to make a living here, contribute to the state coffers and allow thousands of young players to be play football here. If the FAI/clubs do their jobs right with this investment the state will recoup multiples of the investment in the years after.

Reduced State Investment

How does the league sustain itself after we reduce the state investment?

Well from the work done over the previous 10 years, clubs now should have a higher base income. The capital money can be reduced as a lot of capital projects will be done and the prize money/grants can be reduced as football income will have grown. Clubs will probably need academy support in the future in terms of high performance like all sports here are helped.

Our sustainable income should grow for the following reasons:

• Better facilities should allow clubs to grow their gates with the right marketing by clubs. There is clear data to show the attendances grow in new modern venues.
• Likewise commercial income should grow as a more professional league in better venues with more coverage will allow clubs to attract more sponsors.
• Transfer income should also grow with a proper academy model. By investing in this area, clubs can pay coaches, retain kids on proper contracts and when selling drive higher fees like many mid tier/smaller leagues.
• European money should grow (and some should be split in a pot). At present we start this year ranked 46th out of 55 nations in Europe. We have 1 seeded team and 3 non seeds in Europe. At a minimum we will bring in €1.55m or so if we lose all ties (hopefully more). By having a professional funded league here we can improve the overall and individual teams coefficients and generate more income from this source.

So while we would lose the €4m state prize money/grant money the income growth from the above sources would more than replace this to keep thing sustainable.

The FAI and financial management are key here. We need a proper structure to ensure this money isn't wasted, money for facilities, for the academy etc go to where it should go. Also clubs are living within their means and can survive post the state help. Otherwise its a wasted 10 years where some players make a load of cash, some clubs win some trophies and we have nothing to show at the end, the 2000's anyone?

Long Term Benefits (financial & non financial)

People with more football knowledge have decided the national league underage pathway is the best so I am sticking with that model. If we got the state support (and remember a chunk of that is the state just giving money we give to it back for a while) we could build a proper football industry here (BTW I hate that term) The only reason there is a horse racing or greyhound industry here is state support so football is no different. In 10 years time we could have;

• A league with decent facilities for fans and players. A league with a bigger support base than today.
• Training facilities and education link ups to keep young players here until 19/20 and move when they get good opportunities and clubs are rewarded.
• A league that has moved up the European coefficient rankings which shows the improvement in the league and gives more credibility to football here. A team in 1 European group stage competition every year would be a realistic aim.
• Safe secure jobs for 400/500 people on a full time basis. They wouldn't be millionaires at the end but kids coming through the youth set ups could see a future where they earn €30/40/50/60k per annum here and it not blowing up after 12 months into a 3 year deal.
• The national side will be improved at all age groups. Players getting more coaching hours from paid coaches can't but help our coaches and players improve.
• Lastly if we used the opportunity right, a league set up to grow in the years ahead. A full time league, progressing in Europe being played in good facilities will be a much easier product to sell to fans, sponsors and in todays age most importantly TV.

There is probably loads wrong here, I don't have access to FAI numbers or detailed club numbers but I think my figures are broadly right. It sounds a lot of money but in the scheme of things its not for the state and the benefits significant . To make anything like this work it would need the clubs and FAI to work together, not to benefit 1 or 2 clubs, but to improve the overall league. That's what the premier league did at the start, its what the NFL, NBA etc do today. They all know that for league to be successful its only as good as its weakest part and for it to grow we all need to be successful/competitive.

Personally I think with some vision and ambition we could step change football here that in the long term would really change things for the better. There would be some hard decisions on the way, but that's for a different debate.

End

2018 Premier Division Update/Uefa Licensing Report

 

2018 Financial Review

I haven't written any blogs in a while as firstly a lot of clubs don't have to report much data that's worth looking at and secondly there hasn't been a lot of filings. I am looking at 2018 here as all clubs have filed reports and also I am comparing to the annual Uefa report and their last one is 2018. That can be found here.

2018 Uefa Highlights - Revenue

You would assume the headline numbers here are all accurate as based on the annual audited accounts as submitted to the FAI/Uefa. Per the Uefa report the league of Ireland revenue for the 10 teams was €15m. This has us ranked 36th in Europe in terms of the revenue the league brings in. Coincidently our Uefa country ranking in 2018 was 37th which shows we are broadly in line with where we should be in terms of the revenue our league generates.

While we are 36th in revenue you can see there is a big gap to even 30th, 6 places higher where Bulgaria brings in €42m annually, almost 3 times our income. They have a TV deal would circa €3m where we have a TV deal worth nothing. Again our low TV deal is not too uncommon with the nations below us with very few of them having much/any income from TV.

You can also see that transfer income is a very small part of the leagues income with only 6% coming from that source in 2018.

The table below shows the split of revenue by type from the table above. The revenue from Uefa makes broad sense with €1.8m being earned by the 4 clubs in Europe and another €0.5m being given in youth solidarity money.

Gate receipts are 28% of our income making up €4.27m. The 28% is the forth highest % of income out of the 55 leagues in Europe and shows why we are disproportionally hit with getting our league back compared to most leagues.

The sponsorship/commercial number looks very high for our league and this is artificial based on the Uefa definition of same. As you can see as well as "pure" sponsorship the likes of club merchandising income, fundraising etc are classified in this area. Clubs like Sligo who bring in €0.5m a year in fundraising would massively skew this number.

Most of our clubs don't have to publish their revenue but 5 of the 10 clubs in the premier that season have. The top 3 in the league that season accounted for €8m or 54% of the revenue. This would make sense as they accounted for €1.54m of the €1.8m Euro prize money in the year. Also they would have had the biggest gate income due to the success of being in contention for the league and having Euro games. Both Cork and Dundalk would have had 2 euro games at home while Rovers and Derry had 1 each.

Our income has changed massively in the last 4 years per these reports. The €15m in 2018 was down (€4m) on 2017. However its well up on the €11m from 2015. The big step up in income in 2016 would have been driven by Dundalk's Euro run in the 2016/17 season and that may also be impacting the 2017 season depending on how they accounted for it. With 2018 being a more "normal" year in Europe the overall league revenue fell back. This highlights how important Uefa income is to the clubs that make Europe.

2018 Uefa Highlights - Wages

In 2018 per the Uefa report we spent €9m of our income on wages which is 63% of the revenue. Over the 10 clubs that averages at €0.9m a club and based on the club average amount this again places us 36th in that table. Per this report wages in Northern Ireland are circa €4m in a year or €0.3m a club so in affect we are paying 3 times the wage on average. 

There is even less information in club accounts in terms of wages. There used to be more but in recent year (since I started reporting them) clubs have removed these from the disclosures to the CRO :(

But the €9m would be significantly covered by the top 3 teams. Dundalk and Cork do disclose the number and they account for over 1/3 of the wages. Shamrock Rovers last disclosed 2017 numbers when it was €1.2m so even assuming a small increase in 2018 the top 3 clubs would account for over €5m of the annual €9m with the other 7 clubs accounting for €4m. To be honest based on the Cork and Dundalk reported numbers the €9m looks low but that's per Uefa.

For comparison in 2015 per this report we had an annual wage bill of €6m between 12 clubs in the premier at an average of €0.5m. So over 2015 to 2019 wages on average in the league have almost doubled from €0.5m a club to €0.9m a club. Dundalk a good example whose wage bill has gone from €988k in 2015 to €2.1m in 2018.Where as other clubs like Shamrock Rovers whose wage bill was €1.3m in 2015 would not have moved as significantly.

2018 Uefa Highlights - Profitability

Per the report 55% of clubs in the top 20 leagues report a profit, so trading at a profit is possible.

However for the leagues 21 to 55 its a different story. Of the 397 clubs in those leagues the average loss is 28% of revenue. Ireland actually fares well in this comparison with the league losing circa 15%. As they mention in the blue box, all these leagues are much more dependent on benefactors, Uefa income and transfer income which makes it harder to plan and easier to run losses. What is clear is that we are no different to most leagues around us and our losses are smaller which is probably down to not having as many big benefactors here.

Overall our Uefa coefficient position is fairly relative to the money we bring in and the money we spend on wages. If we want to  progress up the rankings we need to increase the revenue the league brings in and then invest some of that in the playing budget. You can see from these report the correlation between the metrics. Obviously like Dundalk getting into group stages we will have the odd exception but for it to be regular we need to improve in the ranking here.

Actual 2018 League of Ireland Financial Performance

Based on the above in terms of how the league of Ireland fares in terms of the leagues etc around us, the table below shows the actual published results for 2018.

Since 2018 3 of the clubs here have had financial problems which shows the risk. Limerick didn't participate in the league in 2020 as again the benefactor had challenges, Cork have well known financial challenges and have been relegated to division 1 and Bray were sold over the course of 2018 when their benefactors eased back on investment. In 2 seasons 30% of the clubs in our top division had serious financial problems which is a warning sign.

Even after getting €1.8m in Uefa prize money we collectively lost (€3m) in a season. That's fine as long as there are people willing to finance the losses, as the 3 clubs above show when that stops the challenges come arise.

Our league is really no different to the other 34 leagues outside the top 20, we face the same financing and funding challenges as they do. Our performances in Europe broadly reflect the money and resources in the league although some think we should be doing a lot better. 

But there is a big gap to get to the top 30 from where we are today. Hopefully clubs and the FAI can come together and build a proper pathway to a sustainable full time league here but there is a lot of work to do to get there from the Uefa report and from our own published figures.

2017 Premier Division Summary

Overview

The 2017 season finished with Cork City winning the league and cup double with Dundalk winning the league cup as a very small consolation for not retaining the title. The league was reduced from 12 teams to 10 teams at the end of the season so 3 teams were relegated, highlighted in green below.

Profit & Loss

All clubs have now filed accounts for the year ended November'17. Per the submitted numbers the 12 teams lost a combined (€789k) between them with 5 clubs making a profit and 7 clubs making a loss. Cork City made the biggest recorded profit with +€237k and the other 4 profitable clubs recorded small surpluses.

* As Shamrock Rovers now have 2 entities for their football activities that are intertwined I have included both trading companies above. Up to 2017 all activities went through one entity.

However 2 of the 3 teams that recorded small surpluses, Derry City and St Pats had exceptional monies put through their P&L by theirs owners/shareholders. The third team that received this type of income was Limerick FC. Between these 3 teams circa €1.7m was put these clubs P&L's and without these monies these 3 clubs would have made substantial losses from real football activities.

Of the (€789k) combined losses circa (€643k) of these losses were incurred by the 2 Shamrock Rovers entities. Unlike some clubs Rovers are not putting exceptional monies through the P&L and instead are funding the losses with a loan in the balance sheet. Rovers are also investing heavily in the underage set up which again comes through in their assets.

When you strip out the exceptional monies, the 12 clubs lost a combined (€2.5m) in the year. This is what I would define as the "real" losses the league are incurring on a day to day trading basis. 3 clubs Limerick FC, St Pats and Shamrock Rovers make up circa (€2.1m) of the losses and Derry City account for the remaining (€0.3m) of the losses. The remaining 8 clubs combined make small surpluses or deficits.

Balance Sheet Position @ 30/11/17

One of the best measures of the sustainability of the league is to look at the balance sheets of the clubs. How clubs are funding losses etc would show up clearly here. Below is a table of the 12 sides at Nov'17.

On a combined basis the clubs don't have much fixed assets which stems from the fact that most clubs don't own their grounds. In total there is circa +€4.6m of assets here which included Oriel Park, Richmond Park, the work Rovers have done at Roadstone, and development work at both Sligo and Harps.

In total the club have negative current liabilities of circa (€3.3m) and this is inflated by the very strong position Dundalk FC were in. Excluding Dundalk their is circa (€5.7m) of current liabilities. Most of these relate to 2 clubs, St Pats (€3.9m) and Shamrock Rovers (€0.9m) and the good thing about these monies due is that they are mainly due to owners/shareholders. It does indicate the losses these clubs have incurred and they are lucky they have people that can fund said losses. Most of the remaining clubs have small deficits but nothing that can't be managed.

In terms of long term liabilities there are debts of circa (€3.5m) due but this figure is a little misleading. 3 clubs make up most of this liability but circa (€1.5m) of this in relation to St Pats and Finn Harps relates to government grants for stadium works that are being written off over a long time and would only be repayable in the event of the stadium being sold. The (€0.2m) in relation to Sligo also relates to Government grants.

The only real long term liability relates to Shamrock Rovers who do owe their 50% owner these funds back. These are long term in nature and like the current liabilities above they are lucky that they owe this money to internal parties.

Summary

Overall from the balance sheets of the clubs all 12 clubs are fine from a going concern basis. St Pats and Shamrock Rovers do have large deficits but these are owned internally so no risk of these being called in any time soon that would risk the club. 

From a P&L point of view its clear that the league is still very dependent on "benefactor" monies and Euro money. The clubs lost circa (€0.8m) in the league with circa +€1.7m from benefactors and another +€1.7m from European prize money. As has been shown with Limerick in 2018 this benefactor money can dry up and Derry City in 2019 won't have the Euro prize money. These sudden changes will impact clubs budgets.

Clubs like Shamrock Rovers and Derry City have been in Europe over the last few year and have still run up losses which shows how hard it is to run a sustainable club even with that source of income. In 2018 Waterford FC have taken the Derry City position and it will be interesting to see their losses in 2018 as they lost (€0.3m) in 2017 getting out of division 1. Again Waterford FC have a benefactor underwriting these losses with loans.

Dundalk FC - Domination to Continue...

Dundalk FC over the last 6 seasons are probably the most dominant team since I started regularly attending games in the late 80's as a teenager. Continual success and built on very solid foundations which means that the success may well continue for years to come. Its hard to begrudge them this success given they earned it on the pitch over these 6 years.

New Owners (2012)

The current trading company that run Dundalk FC was set up in Oct'12 and the new owners Paul Brown and Andrew Connolly paid €77k to acquire the club name from Gerry Matthews. On the 21st November 2012 these new owners made probably their best decision when they appointed Stephen Kenny as manager. The club had finished second last in 2012 and only avoided relegation with a playoff win versus Waterford. In Kennys first year they finished second to St Pats with a very new team and since then have won 4 titles.

Results /Numbers

The table below shows some of the key metrics at Dundalk FC over the last 6 seasons. Unlike some clubs success in previous decades Dundalk's success is built on solid foundations with the club making big profits and having large cash reserves. Dundalk have won 4 leagues, 2 FAI cups and 2 league cups, also finishing runners up twice in the league and twice the cup.

The table below highlights the profitability of the club, since the new owners acquired it the club has been well run making only a small loss in their first year. Over the 5 years to November'17 the club made accumulated profits of €3.3m and had circa €2.5m in the bank at Nov'17.

2018 also shows how they are pulling away from the rest on the pitch, with their highest points per game of 2.42 and also winning the cup. With almost all the 2018 squad signed up for next season and a large bank balance plus future guaranteed monies from the CL it will be hard to catch Dundalk.

Player Churn

What makes Dundalk's success even more impressive to me is the amount of key players they have lost and Kenny has replaced them every time. All of these players were lost with no transfer fee income to the club due to short contracts, a situation that they seem to be rectifying this year with longer contract terms. At the end of the 2014 season they lost their top goal scorer Pat Hoban, followed by at the end of the 2015 season losing Richie Towell, again the top goal scorer. At the end of the 2016 season they lost Andy Boyle, Ronan Finn and Daryl Horgan both of whom where key players in winning the league the previous 3 seasons. Finally at the end of 2017 they lost both David McMillan and Patrick McEleney. 

They suffered for these losses eventually in 2017 and being up against a very strong Cork City team with their lowest points per game since Kennys first season but with the re-signing of Pat Hoban for 2018 they have gone from strength to strength. 

Oriel Park/New Owners

Over 2016 and 2017 the owners of Dundalk FC spent circa €900k on acquiring the lease of the club and Youth Development Centre https://www.talkofthetown.ie/dundalk-fc-take-over-lease-at-oriel-park/ which allows them to develop the ground and they also relayed the pitch with a new artificial surface. The success on the pitch together with the acquiring of the site allowed the club to be sold if someone was interested.

The club was sold to Lilywhite Holdings LLC on 18th January 2018. The 2018 season was the first season for the clubs new owners and clearly it has been a very successful season. The new LLC is the 100% owner of the club and is a subsidiary of Peak 6 Investment LP. Peak 6 have a lot of interests in sports clubs  as can be seen with their interests here https://www.peak6.com/strategic-capital/ but buying an Irish club would have historically been seen as an odd investment.

Future Domination??

Dundalk built their success in the earlier years on good management and unearthing players. In recent seasons with the cash made in 2016 they have been able to recruit more established players. This has allowed Dundalk to continue the success while not losing money.

In previous decades, even in the 2000's the dream was to make big money in European Football. This was very hard to achieve but now even limited success in Europe as champions is worth a lot.

Due to Dundalk regularly winning in Europe and their very good year in 2016 Dundalk now have a coefficient of 7 for the 2019/20 CL campaign. This ranking will comfortably see them seeded for round 1 in the CL. At a minimum Dundalk are guaranteed 2 games in Europe assuming they lose their first one in the CL. Based on the 2018/19 figures these 2 games are worth €800k (€540k from the CL and €260k from the EL). However if they can win their first round game which they will be seeded they will make €1.2m (€920k from the CL and €280k from the EL).

Why I think its very hard for any club to catch Dundalk without significant outside investment is that most LOI clubs would not have turnover of €1m per annum from normal football activities and Dundalk can make this level of income from just 3 games. From clubs that do publish a P&L only Cork City would be above the €1m and I suspect Shamrock Rovers would be too. Rovers, Waterford and maybe Cork City will all be unseeded in the EL next season meaning they may bring in circa €240k from Europe v €1.2m for Dundalk. Obviously if these teams can win a few games this prize money will go up but as unseeded teams this will be harder than Dundalk.

In recent years clubs like Rovers, Derry and Pats have made losses (Rovers) or been heavily subsidised (Derry/Pats) and they have not been able to keep up with Dundalk. Only Cork City who have made modest profits over the last few seasons have been able to keep pace but they have indicated for 2019 they will have to reduce spend etc. Other clubs like Bohs, Sligo, Galway, etc have cut their cloth to measure but can't compete in the league as a result.

Given the financial head start that Dundalk will have from European money, for any team to catch them they will need very deep pockets. Some clubs have benefactors but the scale of Euro money means these benefactors will have to spend more to try and catch up. And ironically the team with the biggest benefactor are Dundalk who don't need them based on their rewards on the pitch.

Shamrock Rovers Financial Update 2017

Background

I previously did post on the 3 years to Nov'16  https://leagueofirelandfinance.blogspot.com/2018/08/shamrock-rovers-fc-financial-update.html and a lot has changed since then.

Corporate Structure

At Nov'16 the club was circa 93% owned by Shamrock Rovers Members Club CLG (419156) with Ray Wilson owning the remaining 7%. Following a deal between the members club and Ray Wilson, new shares were issued and the operating club (Shamrock Rovers F.C. Limited) is now owned 50% by the members club and 50% by Ray Wilson with both parties owning 368 shares.

Also a new legal entity called Shamrock Rovers Academy Limited was created which is 100% owned by the operating club. This would line up with their plans to invest in that side of the club and they have done so over the last 2 years. Hopefully the table below shows this as its own of the more complicated structures.

Profit & Loss

As explained Rovers lost (€1.2m) from 2014 to 2016 and the table below shows the 2017  combined P&L position.

In 2017 Rovers split out the assets and costs of the academy making it easier to compare the regular football activities to that of other clubs. The members club effectively operates at break even, it collects subs and passes this money on to the operating club for season tickets etc.

The operating club lost circa (€289k) in the year which was well down on the loss in 2016 of (€661k). However some of the 2016 losses would have also been to do with the academy so its hard to compare both years. Also from 2016 to 2017 Rovers prize money from Europe went up from +€215k to +€440k as they had 2 games in Europe in 2017 v 1 in 2016.

Rovers are one of the few clubs that in 2017 have given payroll information in terms of costs so we can compare their cost here v some other clubs. In 2017 in the operating company Rovers spent (€1.2m) on 34 employees of which 28 relate to the playing and management side. As a comparison in 2017 Cork City who won the league spent (€1.1m) on wages, Sligo Rovers spent (€546k) and Finn Harps (€232k). The 2 tier nature of  the league is highlighted here with Rovers & Cork well ahead of the likes of Sligo and Harps in terms of playing resources. 

In terms of the academy, this is a new company with only 1 year of  trading. In the year the academy lost (€354k). Its 2 main costs in the year were payroll of (€83k) and depreciation on its investment in Roadstone of (€79k), the second one more an accounting cost than a cash cost. The loss in the year was in line with their expectations as they get this off the ground. There is not much info in the accounts on what type of income/costs that are captured in here, if the Bazunu transfer goes into the academy accounts in 2018 it will obviously make a big different to that P&L. I think from Rovers point of view splitting the 2 entities, the first team and academy into 2 companies is good as they can clearly measure both.

Balance Sheet

The operating company has accumulated losses of (€1.63m) and negative reserves of (€1.18m) at Nov'17. In affect this has been funded by a €1.225m long term loan from Ray Wilson. This is an interest free loan that per the accounts won't be asked to be repaid in the next 12 months. On that basis Rovers have no trading concerns.

The operating company like most clubs as it does not own its  ground has little fixed assets, it has large current assets which I assume is money owed by the academy company to the operating company.

The principle asset Rovers now own sits in the academy company. The club have invested circa €610k in facilities in Roadstone over the last 2 years. They have a 10 year licence at this venue per the 2016 accounts. The academy company owes circa (€1m) in current liabilities and there is no breakdown of this but I would assume most is owed to the operating company and Ray Wilson who are funding this investment.

Summary

Rovers are doing things differently to other clubs and also doing some of the same things;

On the different side to others they are heavily investing in the youth side of the club, between operating losses and capital investment the club has spent at least €0.9m over 2016 and 2017 and probably more but I can't strip those costs out of 2016. Time will tell if this works or not, but the standard plan of putting all the money into the first team hasn't worked for most clubs so a change of model can't do any harm. The Bazunu sale in 2018 is a big lift to that plan.

On the same side to others they are losing money on running the club. They have lost circa (€1.5m) over 2014 to 2017 with (€289k) in 2017 alone. This is no different to most clubs, however Rovers benefactor is loaning money rather than putting it through the P&L like Pats, Derry & Limerick and as a result they build up losses. They actually spent more in payroll than the champions did in 2017 which shows their intent in the league. They have the €1.225m loan and as its from a fan they are in a strong position financially but like most clubs they are not operating on a sustainable basis. This is a league wide challenge but Rovers losing money, with €440k from Europe and the second highest average attendance in 2017 shows the challenge for all clubs. http://www.extratime.ie/articles/20256/25-increase-in-attendances-for-league-of-ireland/

The 2000's - The Decade of Excess

The 2000's - When most LOI clubs partied

I don't think there is much new news here for fans of the league in the 2000's, however when you add it all up it makes particularly grim reading. The 2000's was the time when many league of Ireland clubs moved into the full time professional era, unfortunately it was all built on sand and came crashing down across the league.

The table below shows how teams fared in terms of success with a certain level of consistency across the decade. Bohemian FC and Shelbourne FC won 4 leagues each with Cork City, Drogheda Utd and Shamrock Rovers each winning 1. 

Derry City and Longford Town were both successful in the cup competitions as Bohs/Shels while successful in the league didn't win much in the cups.

However while all this success was going on the picture behind the scene was not as nice for the clubs.

The Cost of Success

The table below shows the losses these 7 clubs ran up over the 2000's. Per the published accounts or examiner/liquidator reports the clubs lost at least (€28.4m) and if you read a bit more they lost (€35.7m) over the decade from on the pitch activities. Some of these companies just stopped trading and didn't file completed accounts to their date of cessation but I would be happy with the data from various company disclosures.

I was surprised at the scale of these losses, remember there are other clubs that also went bankrupt in this period that are not counted here as I focused on the clubs that were really "living the dream" and what happened to these clubs. The figures seem large but I will explain where these losses and debts went as such.

Bohemian FC

At the start of the 2000's Bohs had a P&L reserve of close to zero, in affect 65 years of trading at break even. Bohs had run into difficulties before but had managed to work their way out of these issues. Bohs have won the league 11 times but 4 of these occurred in this decade which highlights how successful it was on the pitch.

However off the pitch Bohs lost (€4.4m) and this was after banking circa +€3.4m in proceeds from the sale of Dalymount to Liam Carroll. When you exclude these proceeds the success on the pitch cost circa (€7.8m). The professional era started well at Bohs with the club winning the league in 2001 under Roddy Collins and actually making a profit off the pitch due to the Kaiserslauten game and German TV rights. However from 2001 onwards financially it was all downhill.

Bohs were left with debts of circa (€5m) at the end of Nov'10, mainly loans secured on the sale of the ground which was now gone due to the property boom ending. Ultimately Bohs repaid (€3.5m) of a loan of (€4.5m) with the sale of Dalymount park to the council.

Ultimately to fund the success over the decade Bohs sold Dalymount for +€3.5m, had deposits of another +€3.4m for a failed sale and the bank wrote off  +€1m of the loan.

* Club accounts from 2001 to 2010 on the CRO company number 8751

St Patricks Athletic FC

St Pats started the decade like Bohs with a fairly break even situation for the years they had been trading. From 2001 to 2006 before the club was sold to Garrett Kelleher the club had ran up losses of circa (€2.6m). By the end of 2010 these losses had risen to (€5.7m) meaning Pats lost (€3.1m) between 2007 and 2010.

However when you read the accounts, it is noted that St Pats also had debt forgiveness to its parent company of (€3.9m) in those 4 years. At the end of Nov'10 the company owned its parent company circa (€3.7m) even after the (€3.9m) write off. In reality over the decade the club lost circa (€9.6m) on the pitch. The club still owns the stadium unlike most of the clubs covered here which still remains its principle asset.

The Pats figures seem very high, but equally the accounts are very clear and the notes very detailed. Of all the figures this one stumped me the most but as I said, the info is there for anyone to read.

* Club accounts from 2001 to 2010 on the CRO company number 189439

Shamrock Rovers FC

Rovers started the decade working on getting the Tallaght Stadium built which they were going to own at this point on a long lease. I can't remember all the issues back then but the lease was owned by Mulden International and the trading company of Rovers was Branvard Limited.

Rovers actually went bang prior to some of the really big losses in the late 2000's. In April'05 they applied for Examinership to try and reduce some of the accumulated debts and allow the club to keep trading. Per the examiner the club had run up debts of circa (€3.6m) and of these they repaid circa +€0.6m. Its hard to work out just when Rovers ran up all these debts but per their accounts at May'00 they like Bohs/Pats had traded close to break even, by Nov'03 they had lost (€1.7m) and they didn't file 2004 accounts. The next accounts filed were in 2005 post  the examinership and at this stage the debt was greatly reduced. Rovers were relegated in 2005 as out of the examinership process issues arose with their submitted accounts but were promoted again after the 2006 season.

Not surprisingly while other clubs were running up big debts in the late 2000's Rover broadly traded at break even after coming through the examinership process.

* Club accounts from 2001 to 2010 on the CRO company number 245954 & Court Order of 02/08/05 exiting Examinership

Drogheda United FC

The company that ran Drogheda United was called Hinge Trading Limited and was only set up in 1997. So at the start of the decade this entity had not ran up much accumulated losses, very similar to the other clubs. In 2003 this company was taken over by another company called Drogheda United Football Club (O2) limited.

Between 2005 and 2007 (3 seasons) Hinge Trading limited lost circa (€4.5m) which culminated in them winning the league in 2007. However even with this league win the problems were clear, the club went into examinership by Oct'08.

The court accepted examinership document is available to read but the quality is very bad to make out all the losses and the agreement.

Ultimately it would appear that most of the losses that Hinge Trading ran up were covered by the directors of the parent company buying new shares in that company to fund these losses. However in 2008 this stopped and Hinge Trading had debts itself of (€0.7m) which it ran up over 2008 which led to Hinge Trading going into Examinership.

Drogheda were deducted 10 points for the examinership but stayed in the premier division. Ultimately a new members owned club was created in 2011 as a holding company to own the club together with a new trading company to run the club, similar to the Shamrock Rovers structure. Both the previous 2 entities that ran the club in the 2000's were voluntarily struck off the CRO in 2013.


* Club accounts from 2001 to 2010 on the CRO company number 266933/366788 & Court Order of 30/01/09 exiting Examinership

Shelbourne FC

Shelbourne FC probably started the move to professional football in the late 90's early 2000's whose model was then followed by other clubs. Shels traded under a company called Accolade limited since the mid 80's. In 1993 the company changed its rules in order to avoid company filings by in affect stating that the owners could not bank any profits and any surpluses would go to the FAI. A little known rule but Shels employed it.

As a result there are no annual accounts to review apart from the 2014 accounts which were submitted and in affect closed the company down. The company was liquidated in May 2018. Shels last won the league in 2006 but were immediately relegated at the end of that season for financial problems. Accolade would appear to be replaced by a new company in 2007 called Shelbourne FC limited but they also don't file full accounts. Shels have only had 2 seasons back in the premier division since 2006 in 2012/2013.

Where the (€6.2m) loss comes from in the 2000's is that this is the accumulated losses when the company completed accounts. Assuming like most clubs that coming into the decade the club was circa zero on this line it would give a (€6.2m) loss over the decade and really over the 6 years to 2006.

How this was funded is harder to explain, the easiest bit is like Bohs, Shels banked circa +€3.1m for deposits on the sale of Tolka Park. These deposits were written off in the accounts as that deal fell through with the property bubble ending. Accolade at wind up also had other creditors of circa €1.5m that were written off as part of the wind up. Its a shame there are not more details available here but the (€6.2m) accumulated losses is a fact as such.

* Club accounts 2014 on the CRO company number 106863

Derry City FC

Derry City traded under the UK company Wellvan Enterprises. While they didn't win a league in the 2000's they contended a few times and won both the FAI & League cup a few times. Derry finished 4th in the 2009 season but were relegated after than season to division 1 after financial difficulties. Wellvan ceased trading at the end of the 2009 season and was replaced by Derry City Football Club Limited in 2010. Derry were promoted after only 1 season in the first division.

The last annual accounts the company filed before their trouble was Nov'07 and at that stage accumulated losses stood at a modest (£166k) which would be nothing to worry about. No accounts were ever filled for 2008 or 2009 as the company appointed an administrator in Nov'09.

Per the administrators report of Nov'11 & Nov'12 there were (£1.5m) of unsecured creditors and this is where I calculate the losses the business was running up to Nov'09. As a result of these debts the company choose a voluntary liquidation as the administrator had no chance to save the company or repay the debts.

* Club accounts 2001 to 2007 on the CRO company number NI028477 and administrator report Nov'11/12

Cork City FC

Cork City were one of the more complicated clubs to look at as they had 3 companies involved in running the club, Vendra Investments to 2002, Cork City Investment Ltd 2003 to 2009 and FORAS for 2010. Cork City actually look well run up to 2006 with accumulated losses of circa (€250k). At the end of 2006 Brian Lennox sold the club to Arkaga and was then later sold again to Tom Coughlan.

The company never filed accounts for 2008 or 2009 and ultimately a new company FORAS set up. When Cork City were relegated in 2009, FORAS entered the league in the first division in 2010, winning promotion in 2011 after 2 seasons in the first division.

In 2007 when the last published accounts were published Cork City lost circa (€0.7m) for the year and circa (€0.9m) since 2002. The club owed Arkaga circa (€1m) in the balance sheet at that date.

I only estimated losses of another (€0.6m) in 2008 and 2009 to come to the (€1.5m) figure and that is based on media reports at the time. To be honest, I think based on 2007 and the hike in losses across the board in all clubs it could have been a lot higher in 2008/09.

* Club accounts to 2007 on the CRO company number 366256

Summary

This is a very long post and I appreciate it if you are still reading here. I wanted to explain the facts as detailed as possible to give the reader confidence on the figures as a loss of (€35.7m) across 7 clubs seems massive. The real losses in the league would be higher, probably over (€40m) an example being Sporting Fingal who only played 3 seasons and in the first 2 of those needed (€1.25m) from Gerry Gannon, they went bang at the end of year 3 and never filed those accounts. Dundalk had a few entities from a co-op and another limited company running the club in the 2000's, each change required when financial difficulties arose. For Longford who were successful in the early 2000's I can't actually find the legal entity that ran the club then but a new one was set up in 2007.

What did all these losses get us apart from some success for some clubs and some UEFA ranking points. Very little. Bohs lost Dalymount, Shels lost Tolka, Rovers lost owning Tallaght. Cork/Derry/Drogheda/Rovers went through examinerships to try and save the clubs, some succeeded, some clubs had to start again (that's another debate). Numerous clubs across the country had regular financial problems, all of which became apparent towards the end of the decade.

Thankfully per my other posts the league is a lot better run today in financial terms, also with the youth leagues etc money is going into develop players for the future and not just the first team. The key lesson for clubs now is not to over extend themselves to chase teams ahead like most of us did in the 2000's. That's hard when fans want success etc but hopefully enough of us have learnt the lessons for it not to happen again on this scale.

Finn Harps FC Financial Update 2014-2017

Background

Finn Harps were founded in 1954 and first played in the league in 1969. Their legal structure is similar to Cork and Sligo Rovers and they operate as a co-op under the name of Finn Harps Co-operative society Limited (No: 4898R) and this legal entity was created in January'97. Finn Harps currently play their home games in Finn Park but are hoping to move to a new stadium that has been in the pipeline for many years and in recent months positive progress has been noted in terms of this development http://www.fai.ie/domestic/news/fai-welcomes-finn-harps-stadium-project-funding Over the 4 years in review here Harps finished 5th in the first division, followed by 2nd and a playoff win for promotion to the premier division in 2015, followed by 10th in the premier division in 2016 and relegation in 2017 with an 11th place finish and the league being reduced to 10 teams.

Profit & Loss

Over the 4 years, Finn Harps made a small loss of circa (€14k) with all this loss coming in 2017. It would appear in 2017 that Harps tried to avoid relegation with the reduction in league size with a large increase in payroll which was up (€70k) on 2016.

Overall over the 4 years Harps looks like a prudently run club at the minute with the club not really spending more than they are taking in. While they appear to be loss making, if you exclude depreciation on the stadium and the grant write back the club would have made a cash surplus of circa +€25k. This depreciation and grant amortisation is to do with the stadium assets.

In terms of revenue Harps have increased that significantly over the 4 years, a promotion push in 2015 increased gate receipts by almost +€60k on 2014 and gates again increased by +€65k in 2016 with Harps being in the premier division. Gates fell a little in 2017 as the team were towards the bottom of the table. Being in the premier and having a level of success is very important in terms of revenue to a club like Harps in looking at the P&L.

In terms of revenue and thus resources available to invest in the team Harps would have the lowest revenue of the teams that share their data. The table below shows that Harps bring in only 17% of what Cork City bring in and only 1/2 of what Bohs bring in. This disparity in terms of revenue immediately puts them at a disadvantage in terms of staying competitive.

Like Sligo Rovers, Harps get decent support from their supports and local community with with in 2017 circa €125k of their revenue coming from Draw Tickets, Lotto & Half Time draws, Donations and 500 club donations. This is a very big revenue source for the club and accounts for circa 27% of all their revenue.

In terms of costs, like most clubs Harps main cost is the playing side of the club. Payroll was very modest in 2014 and 2015 when in the first division at (€93k) and (€109k) but did increase with the move to the premier division. In 2016 this cost increased to (€164k) with a further increase in 2017 to (€232k). Most clubs don't have to declare their payroll figure any more but of those that have this is by far the lowest payroll cost to date.

Balance Sheet

While Harps have been well run over the last 4 years this may not be the case since they first started trading as the company has accumulated losses of circa (€627k) and given that the capital invested is only +177k the club has negative reserves of (€450k).

The principle asset Harps have relates to the stadium and property which appears to be on a long leasehold. This asset is valued in the books at circa +€774k at Nov'17.

Harps have very little current assets but do owe (€333k) in current liabilities at Nov'17. Just over 1/2 of this is owed to fans of the clubs through personal loans which does reduce the likelihood of these debts being called in. This also again highlights the dependence of the club on its fans.

Harps biggest "liability" relates to Government grants and this is not a real liability as such and won't have to be repaid as long at the ground is used. This amount is not disclosed in full but would be circa (€720k) at Nov'17 and is more an accounting liability than a real liability. Harps also have a debt of (€228k) in long term debts but as this amount hasn't changed in 4 years there is clearly no immediate threat of this being required to be repaid by the club.

So while the balance sheet is not very healthy, the 2 main debts owed to fans and a long term liability make up most of the "real" debt and on that basis there seems little risk of Harps being in any trouble with their debt given they are being run prudently today.

Summary

Harps are another club living within their means but struggling in terms of performance as a result. Harps don't have a benefactor and have had no European money in the 4 year period, but as the revenue shows just being in the premier division makes a big difference to the club. Looking at the Balance Sheet Harps did live outside their means in the past and have the legacy debt as a result but thankfully this debt is structured so as not to threaten their future at the minute.

Harps will now need to focus on getting back to the premier division (they have a good chance of this in 2018) while moving ahead with the new stadium. However competing in the premier division will remain a challenge given their location and population in attracting both players and fans in order to drive revenue to be able to compete. This challenge though is not unique to Harps as the gap widens even within the premier division between the teams with Europe/Benefactors and those without.