Record Â£49.5m Leeds loss

Peter Reid: his future is still uncertain at Leeds

14 April 2012

Leeds United today set an unwelcome record when they announced the biggest ever losses by an English football club.

The Elland Road club made staggering pre-tax losses of £49.5million, an increase of £15.6m on the previous year and still have debts of £78m. This despite selling players including Rio Ferdinand, Robbie Keane and Jonathan Woodgate for a massive £50m.

The extraordinary financial disaster at Leeds is laid bare in their accounts for the year ending 30 June and will stand as an abject lesson to all clubs.

The astonishing profligacy of the reign of former chairman Peter Ridsdale is obvious and it appears the club have taken the decision to include as many of the problems in this year's accounts as possible.

It also emerged today that Leeds do not even own some of their star players.

Professor John McKenzie, the executive chairman who will now be taking a non-executive chairman role, revealed that many of the players brought to the club by Ridsdale were purchased under a loan scheme, similar to a hire purchase policy. The scheme was used because Leeds could not get the finance for the players from more traditional areas such as bank loans because of their financial problems as they chased success.

Mark Viduka, Olivier Dacourt (now sold to Roma), Michael Duberry, Eirik Bakke, Dominic Matteo and Danny Mills (currently on loan to Middlesbrough) were among those bought under the scheme.

Leeds paid a minimal fee up front to the insurance company running the scheme and then repayment costs plus interest for every year of the player's contract.

If the player was sold before the end of his contract then the club would receive only a small percentage of the fee.

McKenzie admitted that if Viduka was to be sold now by Leeds for £10m, the club would receive only £4m, with the rest going to the insurance company.

The Leeds chairman also revealed how the club is still paying £500,000-a-year towards Robbie Fowler's wages despite his move to Manchester City and £200,000 a year of Robbie Keane's £800,000 signing-on fee at Tottenham.

The figures show:

a pre-tax loss of £49.5m compared to £33.9m the previous year;
a 21 per cent fall in turnover to £64m;
a staggering £5.7m in compensation and damages agreements to management, mostly to previous bosses David O'Leary and Terry Venables;

But according to McKenzie, who inherited the problems from his predecessor, there is some hope.

He said: "We have taken £20m of costs out of the business and rebuilt the management team. As such, it is now possible to begin to look forward with some confidence. In subsequent years we anticipate that the plc will move into profit."

He is clearly critical of Ridsdale's regime when he said: "An initial budget for 2002-03 was based upon an unrealistic view of achievable income.

"A salary bill [both for players and administrative staff ] and related expenses was far too high for a business of this size."

As expected, Leeds confirmed that former Chelsea chief executive Trevor Birch, an expert in turning round financially stricken businesses, is joining as chief operating officer on 1 November.

And McKenzie made it clear that the aim for next year was to break even at an operating level There is also a proposal to inject £4.4m in cash into the company by the end of the year which will be underwritten by deputy chairman Allan Leighton in return for shares.

Leeds only just escaped relegation last season, which is why their turnover is down. And they face a fight to avoid the drop this season with continued speculation over the future of boss Peter Reid.

John Boocock, of the Leeds United Supporters' Trust, refused to blame McKenzie for the club's plight.

He said today: "There has been a complete lack of planning as far as the club is concerned. We have this unserviceable, unmanageable debt. If we were making nuts and bolts the receivers would have been in called in by now.

"The one thing we know about Professor John McKenzie is that he does understand about business and I'm not blaming John for any of this."

"He understands how business works and he knows that the position of a chief executive and chairman should be separate - all best practice says that's what you should do," he added, referring to Birch's appointment.