Fulham's new stand

This summer, the borough of Hammersmith & Fulham granted planning permission for Fulham FC to make some big changes at Craven Cottage.  It all revolves around the Riverside stand, which is going to be enlarged – and transformed beyond recognition in the process.  Below is an artist’s impression of what it will look like; there are more images here. So, what are the economics of all this? 

 For a start, the capacity of the ground will be increased by 4,300 – from 25,700 now to 30,000.  At present, each Craven Cottage seat generates an average revenue of about £23 per (domestic) home match.  So if the new seats can be filled at that kind of rate, they would generate just over £2m of extra revenue each season.

But it might actually be more than that, because the new stand will provide better spectator and corporate hospitality facilities than those currently on offer at Craven Cottage.  And that means that the seats should command commensurately higher prices.  That’s one reason why, for example, seats at Stamford Bridge bring in over £40 per domestic home game (that’s my best estimate, anyway – Chelsea are a bit cagey about disclosing their gate receipts).  So, with a bit of extra pricing power and a fair wind, the new Riverside stand might earn Fulham an extra £2.5m a year.

(Incidentally, seats at Loftus Road appear to bring in just under £20 per domestic home game, or about 15pc less than at Craven Cottage.  Again, that’s a best estimate based on incomplete disclosure by the club – but it would seem to tie in quite nicely with what we know about Loftus Road’s relatively dilapidated condition.)

So, how important would an extra £2.5m a year be for Fulham?  Well, I’ve argued here before that the club has been more or less self-financing ever since the Great Escape season of 2007-08, when Lawrie Sanchez blew £20m-odd in the transfer market (not all of it wasted, by the way – the likes of Davies, Konchesky and Baird have served the club well).  And cash out has also been balanced by cash in on an underlying basis – i.e. stripping out the buying and selling of players (invariably a net cash outflow) and earnings from the two Europa League campaigns.  On that basis, an extra £2.5m points toward a small underlying cash surplus each season – enough to prime the transfer kitty, but basically still obliging the manager to finance player purchases with player sales.

That leaves one question outstanding – where’s the money going to come from?  Because make no mistake – this is going to cost.  The planning application documentation puts the cost at a staggering £30m.  You could build a whole new stadium for that – Southampton, Stoke City, Sunderland, Swansea City and Wigan already have.  But the site here is a particularly tricky one, hemmed as it is by the river, the park, and the houses.  Arsenal had a similarly cramped site at Ashburton Grove, and it cost them nearly £400m to put a new stadium on it.  

It’s just about conceivable that Fulham could borrow £30m from a bank.  If I’m right about the enlarged stand generating £2.5m of income a year, then that would be enough to cover the interest on a £30m loan, and leave a bit left over for paying down the principal.  But it would be a slow process, and banks aren’t all that keen to lend to anyone at the moment, least of all football clubs.  So it looks to me like this is a job for chairman Mo and no-one else.  No wonder he felt the time was ripe to cash in on Harrods.  The Mohammed Al-Fayed Stand, anyone?  For the financial support he’s given the club down the years, it’s the least he deserves. 

Recent contract extensions

We’ve seen some out-of-window contract extensions in west London recently.  At Chelsea, David Luiz signed up for another year, through to 2017.  And Aaron Hughes did likewise at Fulham, taking him through to 2014.  So, rather different contract lengths – and rather different ages too.  Luiz is 25, whilst Hughes is 32.  

Do these details tell us anything about the characteristics of their respective clubs’ squads?  As it happens, they do.

1.    Fulham’s squad has an average age, as of today, of about 29.  At Chelsea, it’s a much more youthful 26.  And the average Chelsea player is signed up until late 2015, whereas at Fulham it’s mid-2014 – almost 18 months’ difference.  That’s the hidden benefit of being a big club – since you know you’re not going to find yourself in the Championship, you can plan ahead with that much more confidence.

2.    You can also afford to buy players with resale value.  The average Chelsea player will be 29 when his contract expires, or 28 if sold a year in advance of that.  That’s young enough to command a decent fee.  But the average Fulham player will be 30 when his contract has a year to run – much less easy to get a fee for players like that.

3.    While we’re at it, how do QPR measure up on these criteria?  They look pretty similar to Fulham, is the short answer.  As of today, their average player is aged 28 and is contracted until mid-2014, when he’ll be aged 30.

Queen's Park Rangers

Thus far, I’ve written only about Fulham and Chelsea.  Time now to extend that to west London’s third Premier League club, Queen’s Park Rangers.  Here are eight observations that sum up their financial position.

1.    This is a club that had a near-death experience in 2007.  Cash was heading out of the door faster than then-owner Gianni Paladini could put it in, and administration loomed.  Enter the holy trinity of Flavio Briatore, Bernie Ecclestone and the Mittal family.  They funded a cash shortfall of some £10m that season.  And after that…   

2.    …their initial focus wasn’t so much the playing squad as the stadium.  £5m was spent in those first two years on sprucing up Loftus Road, including its corporate boxes – an important moneyspinner these days.  That was paid for mainly by new sponsorship deals – out went Le Coq Sportif and Car Giant, and in came Lotto and Gulf Air.  Even so, the new owners still had to put in £20m that second season to keep the show on the road.  No wonder Paladini wanted out.  Still…

3.    …the cash drain eased the following season, 2009-10, falling to less than £15m.  In part, that was down to canny transfer market dealings, which brought in net proceeds of nearly £3m – probably due mostly to the sale of Routledge to Newcastle United.  But the club’s revenue remained dismally low at less than £15m – not even enough to cover the wage bill, and less than a fifth of what Fulham brought in that season.  It was time to get out of the Championship.  And so…

4.    …Neil Warnock was given money to spend.  Nothing excessive, mind you, but for about £6m he was able to bring in the likes of Kenny, Mackie and Taarabt.  They delivered promotion.  Which meant that…

5.    …revenue would have soared in 2012.  We don’t have the accounts yet, but I’d estimate that revenue for the season came close to £50m – at least triple the previous, promotion-winning season.  But the cash drain would have continued, with a series of expensive player acquisitions to keep the team up: Ferdinand, Wright-Phillips, Cisse, Zamora among them.  But by then…

6.    …it was Tony Fernandes’s job to provide the funding, the Asian airline tycoon having bought the club just as the season commenced.  So just how rich is he?  Well, ‘Forbes’ puts his net worth at about £300m.  Pretty darn rich – but not as rich as Fulham’s Al-Fayed (£800m) or Chelsea’s Abramovich (£8,000m).  Thus he probably can’t show quite the level of largesse towards his team as they have done.  Remember, MAF has put a cool £200m into Fulham down the years.  It’s unlikely that Fernandes could manage that – although of course he’s starting with a Premier League club, whereas Fulham were in League Two when Al-Fayed arrived.  

7.    This season, QPR’s revenue is unlikely to be much different to last season – and neither is the cash requirement, with another string of player acquisitions over the summer.  My forecast is for an overall cash outflow in the region of £20-25m, again.  But…

8.    …that it’ll be less if there are player sales in the January window.  And that looks like a good bet, because the squad is now on the large side: 29 players, versus 24 at Fulham and 23 at Chelsea.  None of the players with contracts expiring next summer are young enough to be all that saleable, so that leaves the young-ish summer 2014 expiries as candidates for sale: viz. Traore, Ferdinand and – above all – Faurlin.  Don’t be surprised to see QPR cash in on him come the New Year.

Chelsea and the transfer window

Let’s head back up the Fulham Road to Stamford Bridge.  When I last wrote about Chelsea, shortly before the summer transfer window closed, I said that they were on course for a “huge” cash outflow.  So how did things pan out?

1.   The net summer outlay was indeed huge.  It looks to have been around £65m, with only one significant player sale (Meireles, for £8m) to defray the cost of Hazard, Oscar, Moses and Azpilicueta.  Then again…

2.   …this kind of expenditure isn't unusual for Chelsea.  It was nearly as much last season (Mata, Lukaku and Meireles accounting for the majority of it) and substantially more in 2010-11, the second of Ancelotti's two seasons at the helm (Torres and Luiz were the big buys that year).  Still, at this rate…

3.  …Chelsea will need about £60m of extra cash this season, I reckon.  The main variable is progress in the Champions League, and I’m assuming exit in the quarter-finals.  But even if they win the thing again, net cash outlay for the season will still be in the region of £30m.  And…

4.  …that’s probably okay with Abramovich.  I've argued in the past that he is content to subsidise the club to the tune of about £50m a year.  If so, then he'd probably rather like to see progress to the Champions League semi-finals.  Alternatively…

5.   …Di Matteo could raise some cash in the winter transfer window.  Malouda – banished from the first-team squad to train with the youngsters – is one possible source of that.  But since his contract expires next summer anyway, he may be content to hang on and move as a free agent.  So instead…

6.   …Sturridge could be offloaded.  His contract reportedly expires next summer too – at which point he’ll still be young (23), and with a very respectable Premier League goalscoring record to boot.   There would be plenty of clubs willing to pay £10m for him, which would be enough to keep Chelsea’s cash burn for the season down to around £50m.  

7.   The other main options for bringing in some cash would be Mikel and Ramires, both of whom will be entering the last 18 months of their contracts in January, and both of whom are comfortably the right side of 30.  But they seem to be very much part of Di Matteo's squad at the moment.