But what about this figure of £1m a month that gets banded about. Isn't he propping us up to the tune of £1m a month. Or is that an acceptable figure based on the revenue we generate.
My knowledge of FFP could be wrote on a mouses handkerchief and I have neither the time or energy to learn more just interested in how everyone is so confident that we are operating within FFP when Gibbo is propping us up month on month
There are two wholly different things here. You need to unpack them.
First, is the month to month running of the club, as shown in the P&L accounts for the year ending every June 30. So the club receives revenue in five main ways - gate receipts, prize money, tv money, and merchandising/sponsorship, and player sales.
The club spends money on wages, of both players and staff, heating, lighting, rates, rents, repairs to the stadium and trainng ground etc and a myriad of other costs that businesses incur . In addition, when the club buys a player, then the transfer fee is charged to the P&L on a proportionate basis - if the player signs for four years, then a quarter of the fee is charged every year for 4 years.
These are the accounts which appear about this time of year at Companies House. And MFC loses a load of money every year (except for one year in the Prem League when it about broke even) - expenditure is greater than income. In the real world, then the company would go phtang and disappear, but this is football. To preserve the football club then Steve Gibson's parent company makes good the loss every year by "loaning" MFC an amount to cover the losses. As a very, very rough figure over about 10 years, this has been £120 million, so that's where the £1 million a month number comes from.
The "loan" is theoretically repayable, although everyone in the real world knows it never will be, because MFC goes on losing money.
But it's not good business or legal practice to just leave these loans in place forever. For example, HMRC might say that the holding company is overvalued because the balance sheet shows a £100+ million loan to MFC which won't be repaid. Similarly, the value of MFC might be undervalued because there's a loan shown which the parent company doesn't expect to be repaid.
And so, every few years, Steve Gibson capitalises the loan - in other words converts it to shares. He (or the parent company) already owns millions of shares, now he owns a few million more. The value of all the shares reduces every time new ones are issued because the value of MFC is not increasing. Like cutting your pizza into four pieces, then eight, then sixteen, the slice gets smaller - unless the pizza is bigger - which in the case of football clubs it never is bigger UNLESS the club is promoted to the Prem League.
So FFP takes a subset of the accounts, by stripping out every cost that isn't directly involved in day to day football operations. So repairs to the stadium, or new stadiums, or training grounds, or junior teams, community programs, heating, lighting, rents, rates, marketing costs, legal costs etc etc are all stripped out of the equation. Basically what is left is revenue - as in the first paragraph above - and team costs. And the team costs are basically managerial wages, footballer wages, agent fees and transfer fees. In other words - the cost of fielding a league team every week.
Most clubs -and especially outside of the Prem League - still lose money on this calculation, so to make sure a club is sustainable, the amount of allowable losses is capped. And because football is a fluctuating business, the losses are capped over three years, not one. So if a team has a terrible season, it can still rescue the situation by cutting back in years 2 and 3. Allowable losses are greater if the club funds its operations though shares rather than just loans. I believe the limit is £39 million of equity injection (ie shares) versus £30 million of loans, there are some people who know more precise numbers than me. FFP is to stop unscrupulous club owners from borrowing a load of money, saddling the club with huge loans, essentially betting on promotion and then disappearing if the gamble fails, leaving the club to pay back millions it can't afford to pay.
Hope this helps.
