BWFC: Spending An Object Or The Object Of Spending
The Jordan Rhodes thing- whatever that was- now looks dead in the proverbial water. Whether it was ever alive will be open to debate amongst Whites` and Rovers` fans. But what interested me and should garner interest from the Wanderers` faithful was the £9 million figure being banded about. Of course, no offer of £9 million was ever executed from the Reebok fund but neither was the availability of such an amount debunked from our manager. Dougie did say he would never put the finances of Bolton Wanderers in jeopardy, but how much of that sentiment surrounds the actual fiscal facts of Wanderers` balance sheets and how much revolves around the Financial Fair Play regulations which kick-in this year, only he knows.
What we do all know- or think we know- is the financial situation of Bolton Wanderers Football Club, don`t we?
The Whites` parent company, Burnden Leisure PLC owes Bolton Wanderers owner, Eddie Davies` investment company, Moonshift Investment LTD, £126+ million… Or something like that. To me, it just looks like a whole bunch of borrowing off Peter to pay Paul.
Just like any investment- even though Eddie owns the club- interest is paid to Davies on the £120+ million. However you look at the situation, an interest-income on £126+ million is a nice little earner. Unless something drastic happens, you would expect Davies to be quite happy sitting on his investment- or even adding to it- and letting it gain interest for as long as possible. Even if he did lose his economic faculties overnight, there`s a 10 year pact in place to repay Davies in full.
Also interesting is the amount of 'money` the new sports development is costing… Exactly around the amount Burnden Leisure PLC owes Moonshift Investment LTD. Is there some re-financing or financial massaging going on here? Whatever, Bolton Wanderers` finances are nowhere near as bad as they seem on paper.
Having said all that, surely the signing of Jordan Rhodes, or a player of similar value, would fly in the face of UEFA`s Financial Fair Play policy, right? Especially for a Championship side who makes a loss every year? Well, maybe not.
The signing of a player of Rhodes` value, you would expect a negative £8, 000,000 on the balance sheet for that financial year. But it doesn`t work that way.
When judging whether a team has made a profit or loss for the season, transfer fees are spread out over the duration of the contract. So if Rhodes signs for around £8m on a 4-year deal, it would be accounted for as an expense of £2m a season (£8m ÷ 4 = £2m) each season. If Rhodes is then sold on, any profit or loss on selling the player is determined by comparing their sale price to their 'Book Value'. So, if Rhodes signed this summer, being only 23 years of age and his form continued at this high level, his sale price you would expect to appreciate each season until the age of 28 years of age- it`s already increased 2 million since joining Rovers last season. Hypothetically, if Rhodes stayed with us 2 of his 4 years, his 'Book Value` would be around £12 million, which would show on the assets side of the balance sheet, thus making a 'profit` for the club that financial year. Hence, the £8 million paid for Rhodes would eventually start showing a profit!
Put into context and still hypothetically speaking, if Bolton sign Jordan Rhodes and Jermaine Beckford this summer and the figures are as follows: Rhodes costs £8,000,000 with £20,000 per week wages and Beckford costs £1,000,000 on £40,000 per week wages, they would both equate to around £3,000,000 loss for that financial year. £2m transfer and £1m wages for Rhodes and £1m transfer and £2m wages for Beckford. But- and it`s a big but- Rhodes` 'Book Value` would increase whereas Beckford`s would continue to decline, making Rhodes the financially smarter move. Unbelievable, I know, but that`s the financial world we live in.
The term, 'football is a business`, especially when you look at the financial side of things, never seems more real. Footballers now more than ever- with UEFA`s FFP regulations- are commodities to be floated around the stock exchange. A business is only as good as it`s product, so next time you hear a ridiculous financially sounding transfer story linked to Bolton Wanderers, ask yourself: Is money an object in signing the player or should the object be to spend to accumulate? Rhodes isn`t the only player whose stock is on the rise due to age and ability. A few names spring to mind… Cough, cough, wink, wink… But like what happens when spending money, I don`t want to get too carried away.