Leeds has reported pre-tax losses of almost £50m, a record for a UK football club. Losses of £49.5m were incurred against the background of a fall in turnover for the twelve months to June from £81.5m to £64m, reflecting reduced media income. The club's wage bill was £56.6m or 80 per cent of turnover, far in excess of the 50 per cent level recommended by accountants Deloitte Touche.
Referring to the club's previous management, new chairman Professor John McKenzie commented, 'They lived the dream. I've inherited the nightmare.' The chairman said that he had achieved savings of £20m on an annualised basis since replacing Mr Ridsdale. However, with the club failing to make significant inroads into its £78m debt mountain, he acknowledged that Leeds had a 'long way to go'. Even if the club stays in the Premiership, it could take five years to get ridof the debt. The road could be a very steep one given that relegation is a real threat, a development that would almost certainly end up with the club in administration given that the club does not own the stadium and has no assets apart from the players. Joe McLean, a partner with business recovery group Grant Thornton, said the club's fans and shareholders would have to be ready for a lengthy period of recovery. 'It is important to remember that the root cause of all these difficulties were five or six years in the making and that is probably how long it will take the club to get back on track.' The club has taken on Trevor Birch as chief executive who had experience of managing high debts at Chelsea Village before the London club was taken over by Roman Abramovich.
Leeds is trying to restructure payments on a £60m bond and is in talks with its bondholders, although the club's performance on the pitch may make them cautious. The club also received an equity injection when Royal Mail chairman Allan Leighton, also Leeds deputy chairman, put £2.2m into the club. Another £2.2m came from ARM holdings. Areas of unnecessary expenditure such as the club's large fleet of company cars have been cut back. A complicating factor is that six of the top players bought by Peter Ridsdale were not owned by the club but were leased in an equivalent of a hire purchase agreement. The club still owns the leasing company (Registered European Football Finance) £21.3m. Because it has outstanding capital payments, the club would not receive the full market price for these players if it decided to sell them. For example, if Mark Viduka could be sold for £10m, the club would receive only £3m.
As the club's fortunes went from bad to worse following the 6-1 drubbing at Portsmouth, manager Peter Reid was sacked. He is rumoured to have left with a pay-off in the region of £1m, which at least is less than his predecessors received when they were asked to leave. Leeds shares fell sharply ahead of the news and closed 8 per cent lower on the day.