Dougie Freedman has recently declared that Forest are on track to demonstrate that they are compliant with FFP rules by the summer of 2016. Given the losses reported up to now it seems like quite an impressive achievement, so how might the club have managed to achieve it?
In 2013/14 Forest's reported loss was £22.9m. We can remove capital investment and youth development costs from that. Depreciation was £734k, so we can remove that as capital investment. The budget for Category One academies is £2.5m and for Category Two about £1M. Forest are Category Two but aspiring to Category One so let's say another £1.7m can be removed to split the difference. That gives us an FFP loss of £20.5m for 2014/15.
At that point allowable losses were £8m and falling but in 2016/17 these will be £15m per year and no more than £39m over three years. If we are to come into line the three year period has to be starting from 2016/17, otherwise Forest have already failed before they start. That means they need to save £5.5m on that 2014/15 number to come into line for 2016/17.
Between 2013/14 and 2014/15 Forest signed Danny Fox, David Vaughan, Matty Fryatt, Lars Veldwijk, Michael Mancienne, Chris Burke, Michail Antonio, Britt Assombalonga and Robert Tesche. They also sold or released Matt Derbyshire, Jonathan Greening, Marcus Tudgay, Darius Henderson, Gonzalo Jara, Ishmael Miller, Simon Gillett, Simon Cox, Guy Moussi, Karl Darlow and Jamaal Lascelles. That’s nine in and 11 out but the wage bill as a result has probably gone up.
We should have seen the full benefit of the transfer fee for Darlow and Lascelles in 2014/15, whereas the incoming fees for new signings will be spread over the years of their contracts. You might therefore expect that player amortisation may also have increased since the 2013/14 accounts. This combined with the expected increase in wages means the club will need to save something more than £5.5m compared to an assumed 2014/15 loss, but we can’t be sure how much.
This summer the club has added Matt Mills and Jamie Ward but we know that their costs are restricted to a maximum of £600k per year each. So far they have also removed Dan Harding, Danny Collins, Greg Halford and Jamie Mackie from the wage bill. If we assume Mills and Ward are completely offset by Harding and Collins then the savings for Halford and Mackie can reduce losses with the latter believed to be somewhere around £1.5M saved per year.
In addition plans have been announced to pay off Djamal Abdoun and Radi Majewski, two more big earners. Although this will involve a cost in the 2015/16 season they will be able to demonstrate big savings in a forecast for 2016/17, which is the year presumably more attention will be focused.
On top of that Kelvin Wilson, Chris Cohen, Tesche, Vaughan, Andy Reid, Burke and Stephen McLaughlin are all out of contract next summer which gives them scope to lose a considerable additional amount off the wage bill for the 2016/17 season. Suddenly it does not seem unreasonable that Forest could get to next summer able to demonstrate that they are capable of meeting the new FFP guidelines in the year ahead (ie the 2016/17 season).
The new rules state that clubs should not lose more than £15M in a single year or £39M over 3 years. Clearly if you look retrospectively at Forest’s accounts they will already have broken through the £39M barrier in the two preceding years. If, however, the three year period starts from 2016/17 and looks forward then they do look capable of coming within those rules by next summer.
If this proves to be the case and Forest are able to retain our Championship status in the meantime then the FFP sanctions could actually have been a real benefit to Forest as it will have forced them to reorganise the wage bill and address the recruitment problems of the past.