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Leeds United – Those who cannot remember the past are condemned to repeat it

Last week Leeds United announced a ‘significant’ improvement in its finances, despite a fall in turnover to £24.4m, down from £25.3m. The overall losses at the Whites were reduced significantly from £22.9m in its 2014 financial year to £2m.

The financial improvements stemmed from £9.8m generated by player transfers, including the £11m fee paid by Fulham FC for Scottish international Ross McCormack. There was also a £3m improvement on interest payments to former owners Gulf Finance House (“GFH”), who actually returned money to the club.

Leeds United entered administration on 4th May 2007 and was put into Creditors Voluntary Liquidation on 15 February 2008. The joint liquidators agreed 231 claims for unsecured creditors totalling £18.5m. A second interim dividend of 2 pence in the pound was declared to those unsecured creditors with admitted claims in October 2011, bringing total dividends paid to date to 4 pence in the pound. The liquidators stated at the time that there was unlikely to be any further significant dividends available to unsecured creditors unless Leeds United achieved promotion to the Premier League before the start of the 2017/2018 season. Perhaps more alarmingly for the financial wellbeing of the club was that the same liquidators report stated in previous accounts that an additional £4.75m of consideration will be paid on the condition that the club achieves promotion to the Premier League before the 2017/2018 season.

The latest club accounts for the year to June 2015, which were published yesterday, show that the Peacocks would also have to pay £13.5m to GFH, the playing squad would receive bonuses of £8.3m, and up to £1.2m would be due under transfer fee clauses. Therefore in total the Championship outfit are facing a promotion penalty to the tune of almost £30m if the Whites were to get promoted before next season (at present this seems highly unlikely following a first half capitulation away at Brighton & Hove Albion where United conceded four goals in a 20 minute spell).

There is heavy speculation coming out of Leeds United that the club is surviving on borrowed funds. The East stand was redeveloped between 2011 and 2013 to the tune of £7m, mortgaging the development against prospective season-ticket revenue. However the season-ticket revenue was whisked away when Leeds United had to settle with Ticketus for a debt to the tune of £3.3m.

In 2007 Leeds United were deducted 10 points after going into administration and were relegated to League One. If the same situation were to happen today they would slip from 18th to 22nd and would find themselves in the relegation zone and staring down the barrel of a return to League One.

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