The Daily ITK Discussion Thread - 10th August

[Timberwolf]

3 in 3 out in a week seems extremely unlikely in my opinion

I'd be surprised if we brought in 3 at this point, but I'd be even more surprised if only 3 left.

Last summer alone we got about 6 loans done on deadline day or something stupid. Between the youngsters and the senior players I'd expect around 8-10 players to be be sold/loaned before the deadline this year.

 

[SpartanSpur]

I really don't think we're looking to sign 3 key players though. I think they're very much squad players. We've already made the key signings. No doubt people would focus on the ones made after Kane went rather than the ones before though.

A squad player signing for us may be a key player for a Serie A or lesser league side though...

 

[jolsnogross]

Alternatively, this year should be viewed as a prolonged pre-season where we get young players in, get them trained up and used to Ange's system so that next year they can hit the ground running.

There's no club like Spurs so comfortable with writing off entire seasons. From chairman to fans, hiring caretakers for the majority of a season, to treating the competition we exist to compete in like a training exercise for a year.

I can only hope and assume Ange himself wouldn't accept it.

 

[shoggy33]

I’d go as far as, nigh on impossible with the way we go about things and overpricing our deadwood, I know I sound like a broken record - but genuinely believe we’re done for the window, and all we will see is a few outgoings next week.

Didn't we accepted offers on all 3 of the players on high wages D1 mentions, only for the player to turn down the move?

 

[samspurs92]

Since we're talking football finance, Inc the Boss, a little explainer below. (Wouldn't normally dare to post in this thread. But on topic, thanks WLB, Trix, Herc et al for the ITK; the news is largely positive; the signings so far are encouraging; Ange has been great)

I think there's one other element. Possibly 2 items conflated in the post above (or I may be misreading)

Using Ndombele as an example:
1. Transfer fee reported was £55m when he signed at start of 19/20 (+ £9m potential add ons, let's assume for simplicity the prerequisites for these haven't been met). We don't know the payment terms, but since Aulas was President let's assume favourable to Lyon, say 50%, 25%, 25% over 3 years. In any case, 4 full seasons have noe passed so the liability on the balance sheet (money owed to Lyon) is likely zero at this stage.

2. Separate to how we pay Lyon is how the player, as an asset, sits on the Balance Sheet. This is where amortisation comes in. If Ndombele signed a 5 year contract, then, assumed a straight-line approach (equal each financial year), then his value as an asset decreased 20% each full year, so right now, his value on the balance sheet would be £11m (£55m reduced by 11m or 20% each year of his contract).
This element is what counts for FFP. His book value is £11m, if we transfer him out on a free, we make an £11m accounting loss. (This is how Chelsea can game the system, I.e. they paid no fee for Mount as an academy player, so he is sold at pure profit for FFP).

3. Ndombele's wages are an operating cost and don't affect the balance sheet. Of course, we still have to budget fo the expenditure being incurred, as it's a contractual obligation and a known cost. Various figures are reported, but let's say he's on a basic wage of £125,000 pw (the other amounts beyond that being incentive-related and not met). That's £6.5m per season. (So 6.5 total, or 13 if he has 2 years left)

So, if we "tore up his contract", we pay him £6.5 (or 13m if 2 yrs) hard cash. We're committed to paying this anyway. We'd make an £11m loss on the balance sheet.
In such a scenario (see Aurier and Doherty recently), it is likely a legal settlement would be reached where the player gets less than this, perhaps 6months pay rather than a full 12. There could also be clauses whereby, they get paid up to the full amount (or even more, with a specific severance payment), if they don't take up other employment. This scenario can be good all round- player gets security of pay, can negotiate to sign elsewhere with a nice singing bonus as no transfer fee, club potentially spends less than they would have done on wages (club makes a balance sheet loss by writing off the £11m asset either way).

Other scenarios could include loaning the player out with part wages paid by loaning club, a sale now at whatever fee and savjng the wages.

Happy to take this to another thread for the accountants/nerds.

Using your scenario and for clarity.

The BS impact for this year would only be the write off of an £11m asset which Levy potentially take the hit on.

More problematic would be the impact on the P&L as you would have to take the £11m cost plus the wages paid out which would be £6.5m or £13m as you mentioned.

Obviously selling Kane for such a large amount will help our FFP situation a lot as no fee was paid for him so we will have a lot of room to play with.

I personally think Levy is more concerned with his P&L/operating costs as we hear all the time that his focus is keeping wages down instead of avoiding paying transfer fees.

Do we have a football finance thread? It would be interesting if anyone here knows a lot about the accounting side of FFP.

@Rob sorry if this was too much accounting talk but you did ask ha!

 

[Rob]

There's no club like Spurs so comfortable with writing off entire seasons. From chairman to fans, hiring caretakers for the majority of a season, to treating the competition we exist to compete in like a training exercise for a year.

I can only hope and assume Ange himself wouldn't accept it.

I clearly meant for the fringe players who may not get a look in this season with limited opportunities. We'd effectively have a squad for this season and a development squad for next season when we're presumably back in Europe.

 

[Rob]

Happy to take this to another thread for the accountants/nerds.

Using your scenario and for clarity.

The BS impact for this year would only be the write off of an £11m asset which Levy potentially take the hit on.

More problematic would be the impact on the P&L as you would have to take the £11m cost plus the wages paid out which would be £6.5m or £13m as you mentioned.

Obviously selling Kane for such a large amount will help our FFP situation a lot as no fee was paid for him so we will have a lot of room to play with.

I personally think Levy is more concerned with his P&L/operating costs as we hear all the time that his focus is keeping wages down instead of avoiding paying transfer fees.

Do we have a football finance thread? It would be interesting if anyone here knows a lot about the accounting side of FFP.

@Rob sorry if this was too much accounting talk but you did ask ha!

I don't mind some of the finance talk while we're waiting for new ITK but once we get some, we should probably leave this topic.

Having said that, isn't out "FFP budget" something like £500m now? It was over £400m before we sold Kane. I don't see Levy being able to please FFP poverty here.

 

[samspurs92]

I don't mind some of the finance talk while we're waiting for new ITK but once we get some, we should probably leave this topic.

Having said that, isn't out "FFP budget" something like £500m now? It was over £400m before we sold Kane. I don't see Levy being able to please FFP poverty here.

I agree with you but I just don’t think he can bring himself to take the losses that cancelling contracts will bring.

You can usually move these costs below EBITDA as they aren’t recurring but I don’t think there’s much point as we’re not listed and don’t have to appease shareholders or the market.

 

[Flobadob]

I fail to see a scenario now where the looming rush and panic doesn't lead to some of the planned incomings going to shit.

Yeah I agree. Lessons, in reality, are never learned are they?

 

[Whitey]

He's got no choice now if he wants them gone and off the wage bill. I'm far from Levy's biggest fan but I'm confident he understands this and will lower his expectations. Whether it will be enough or in a timely enough manor to get any more business incomings wise is the question now imo.

Crossed the time line works

 

[SpartanSpur]

I don't mind some of the finance talk while we're waiting for new ITK but once we get some, we should probably leave this topic.

Having said that, isn't out "FFP budget" something like £500m now? It was over £400m before we sold Kane. I don't see Levy being able to please FFP poverty here.

Yeah we must have significant 'FFP headroom' after the Kane deal. That alone should have given us significant spending power for FFP, let alone what was already there. Not only is the large fee hitting the books this year but also the large saving in wages going forward (£12-15m a year if reports were to be believed).

The fact that most clubs in the PL have to pay attention to the FFP limits and we are one of two clubs with significant headroom (the other I believe to be Man Utd) says a lot for the sporting ambition of our owners.

I just hope we have our 'ins' mostly locked in ahead of the last week of the window, with the selling clubs happy to sell late on. You don't have to be a 'proper football man' to realise that that's where the majority of outgoing business is going to happen for most PL clubs.

 

[DogsOfWar]

Yeah, that's what I meant by not being on the books or minimal.

The only bit of the equation I don't know is what happens when we "rip up a contract". If we let Ndombele go to Turkey on a free, do we still pay out his contract or does his new club take it over. I don't think there's a consensus on how that works.

If a player still has value on the books, ie, his transfer fee hasn't been amortised over the length of his contract then that value has to be replaced.
So, if Ndombele has a year left of his 5 year deal and we bought him for £60 million there will be a £12 million loss which is not allowed in accountancy terms so we would have to sell him for this.

I believe players such as Lloris, Dier, Tanganga have no value so would not need a fee to cover their value.

In the past I've had to mothball £100,000's of Capex equipment in offsite storage for years because of this.

 

[Thenewcat]

Since we're talking football finance, Inc the Boss, a little explainer below. (Wouldn't normally dare to post in this thread. But on topic, thanks WLB, Trix, Herc et al for the ITK; the news is largely positive; the signings so far are encouraging; Ange has been great)

I think there's one other element. Possibly 2 items conflated in the post above (or I may be misreading)

Using Ndombele as an example:
1. Transfer fee reported was £55m when he signed at start of 19/20 (+ £9m potential add ons, let's assume for simplicity the prerequisites for these haven't been met). We don't know the payment terms, but since Aulas was President let's assume favourable to Lyon, say 50%, 25%, 25% over 3 years. In any case, 4 full seasons have noe passed so the liability on the balance sheet (money owed to Lyon) is likely zero at this stage.

2. Separate to how we pay Lyon is how the player, as an asset, sits on the Balance Sheet. This is where amortisation comes in. If Ndombele signed a 5 year contract, then, assumed a straight-line approach (equal each financial year), then his value as an asset decreased 20% each full year, so right now, his value on the balance sheet would be £11m (£55m reduced by 11m or 20% each year of his contract).
This element is what counts for FFP. His book value is £11m, if we transfer him out on a free, we make an £11m accounting loss. (This is how Chelsea can game the system, I.e. they paid no fee for Mount as an academy player, so he is sold at pure profit for FFP).

3. Ndombele's wages are an operating cost and don't affect the balance sheet. Of course, we still have to budget fo the expenditure being incurred, as it's a contractual obligation and a known cost. Various figures are reported, but let's say he's on a basic wage of £125,000 pw (the other amounts beyond that being incentive-related and not met). That's £6.5m per season. (So 6.5 total, or 13 if he has 2 years left)

So, if we "tore up his contract", we pay him £6.5 (or 13m if 2 yrs) hard cash. We're committed to paying this anyway. We'd make an £11m loss on the balance sheet.
In such a scenario (see Aurier and Doherty recently), it is likely a legal settlement would be reached where the player gets less than this, perhaps 6months pay rather than a full 12. There could also be clauses whereby, they get paid up to the full amount (or even more, with a specific severance payment), if they don't take up other employment. This scenario can be good all round- player gets security of pay, can negotiate to sign elsewhere with a nice singing bonus as no transfer fee, club potentially spends less than they would have done on wages (club makes a balance sheet loss by writing off the £11m asset either way).

Other scenarios could include loaning the player out with part wages paid by loaning club, a sale now at whatever fee and savjng the wages.

Don’t think anything in here is different to what I said. You just added the cash flow (which I had ignored as Rob was asking about the amortisation element). Agree it’s unlikely we still owe any cash, but Ndombele is definitely on more like 200k a week

 

[Parkie]

Except the Saudi’s will buy them all up for double what they’re worth.

Sadly, there are still quotas there! Maximum of 8 foreign players per team (squad) - increased from 7 before Ronaldo joined (hence the rush of players). Also expanding the league by two clubs over next two years so more spaces. All signings have to be agreed by the league (hence Greenwood not being welcome) and they help pay towards marquee players (aim is 100 top players in the league in near future)… their window closes after ours so it is possible there are teams that will swoop after end of August but would probably be the ones who are looking for bargains as other leagues are shut!

 

[wishkah]

No issues with ITK confirming new signings being dependant on on the outs. We've made good strides with 2 starters (VDV and Maddz) plus a lucas replacement. that's good business.

That was stage 1, now we are stage 2 which completely makes sense.


However, Stage 3 needs to be actionable at the click of a button. we need to sign the kane replacement(s) up top. and that depends on a load of pre-work which should (and i hope has) been done months before). there should be a milestone where if players aren't sold, we shift them and take a hit (as others have said) and immediately action some more incomings.

I don't mind waiting to the end of the window, as we appreciate that's when agents and offers go into overdrive - however the plan needs to be there to make it happen. that's what levy will be judged on. The 'we tried' and 'players wouldn't leave' and 'just couldn't get the target over the line' cannot happen.

 

[N17-77]

Don’t think anything in here is different to what I said. You just added the cash flow (which I had ignored as Rob was asking about the amortisation element). Agree it’s unlikely we still owe any cash, but Ndombele is definitely on more like 200k a week

Yep, all good. Think we're on the same page. Just thought I'd expand a bit, given some of the comments and misunderstandings elsewhere.

 

[danny32]

3 in 3 out in a week seems extremely unlikely in my opinion

If you want 3 in you are going to need at least 7 out unless they are U21.

 

[dellybelly]

I can't imagine that Spurs are demanding a fee for Lloris. I wonder if the holdup is him demanding a loyalty payment in order to cover the drop in wages.

 

[mil1lion]

With no Europe we should really take the opportunity to clear down the squad anyway. Get some under 21s for squad competition. I'm happy with our first team options, I just want a young prospect to cover in place of the age old players who have outstayed their welcome.

 

[Huddlebone]

I don't mind some of the finance talk while we're waiting for new ITK but once we get some, we should probably leave this topic.

Having said that, isn't out "FFP budget" something like £500m now? It was over £400m before we sold Kane. I don't see Levy being able to please FFP poverty here.

The Levy mindset around this would from my point of view be to setup our FFPs numbers for a potential buyer that has alot of money and want to invest able to do so. #Levy logic $$$$$$$