After my poorly organized selection of quotes from L.U.S.T.’s first meeting since the takeover saga began some three weeks ago, the Leeds United Supporters Trust have released an official summary on their blog. They raise some very interesting points and I’m going to focus on two: our potential buyers, and the potential for administration if Leeds is not sold or invested in.

Below is my personal take on things, using what information I have available.

At the meeting, it was revealed that The Trust have now spoken to 3 separate groups (as opposed to 2), but more may be talking to the club. The Trust have also revealed that the groups they spoke to are:

keen to speak to the fans, and recognise the value of the Trust. In fact we are constantly surprised how many people from far afield have seen the vision. The feedback we have had is that everyone who has seen it has bought into it.

The potential bidders:

share the vision, have expressed the wish to invest funds to comfortably get us up into the Premier League and do well there. Definitely, significant funding has been mentioned. …. By reputation they are big players, who fans will have heard of … [some of the] people we have spoken to have previously expressed an interest in Leeds and gone quite far down the road.

The Trust, with their finger on the pulse of the opinion of over 6,000 members, answered the question of the likely scenario if Bates stayed on bluntly:

If [the proposed takeover] does fail we need to work with what we have. But there will be a huge groundswell. New information will come to light, will cause uproar and cause fans to demand change. We hope it does not come to a Plan B situation. The fans would take it out of our hands. We would have to ask members and fans, and take their lead.

Fans have a right to expect better than we’ve received recently. The interest of several groups said to be more wealthy than Mr.Bates, and more importantly willing to invest more wealth than Mr. Bates, means fans have the right to expect the quality that could come from those interested groups. Mr Bates by all means has every right to refuse to sell, but fans also have the right to refuse to buy – something many have exercised individually last season. And the pocket is exactly where Mr Bates seems the weakest at this point in time. Investment would get over the short-term problems for Leeds, but LUST were clear that the relatively heavy-hitting groups they had spoken to had no interest whatsoever in working with Mr. Bates.

Fans questioned how a profitable business like Leeds United Ltd. could go into administration. Leeds posted a profit for 3 of the last 4 seasons. However, as Swiss Ramble (who we have shamelessly purloined this image off) points out, these profits relied heavily in the sales of players. 2008-9’s healthy £4.6m pre-tax profit becomes a break-even of -£0.2m, 2009-10’s exact break-even of £0m, becomes a relatively small loss of £2.9m, 2010-11’s £2.1m profit becomes a loss of £1.7m, only 2011-12’s books show similar figures after player sales.

Leeds has the potential to be a very profitable business, but at the moment it has been relying on the sale of players to break even. And how is this, when Leeds’ turnover in 2010-11 was £32m? This is because Leeds’ board have, in their wisdom, decided spending levels on “other” revenue streams that would make this so. Didn’t like the sale of Shmeichel? Felt Gradel should’ve been kept on? (“I will sign because I am very happy at Leeds”) Liked Bradley Johnson or Kilkenny? How about Delph, do you think the £8m all went back onto players? How about club captain Jonny Howson? (“How can you say you’re aiming for promotion and then sell your captain?“). This is where you differ with our current owners. And the extra investment in “other” income streams recently has not yet yielded a penny extra, as Swiss Ramble shows:

while merchandising revenue has grown 77% (£2.6 million) in the last three years to £6.1 million, other commercial income has actually fallen 8% (£0.7 million) to £8.4 million in the same period.

As LUST wrote in a post-meeting input:

On the related topic of why we need funding (i.e. why don’t we have any cash), simply put, we know that the following cash has come into the business since Admin – £0.5m from FSF to buy the club + £5.8m net cash in from Player Trading + £5m loan (against ST money) + £3.2m cash for the preference shares. This adds up to £14.5m. We also know the following cash has gone out of the business, £4.4m (net) loaned to sister companies + £16.1m on capital projects, so a total of £20.5m. Therefore on this basis there is a cash shortage of £6m. Of course cash is generated by the football activities (gate receipts etc) which is why we don’t have a -£6m figure in the bank but, this helps to explain why there is a problem.

To try to simplify it, we have spent almost half of our initial playing budget last year on “sister companies” like Yorkshire Radio and the Pavilion, while we have spent over £16m(!) on ‘capital projects’ such as the redevelopment of the East Stand (through borrowing money against season ticket sales – like Rangers did) and the actual construction of the Pavilion.

To fund over £20m of expenditure on non-playing activities, we have had to divert potential funds from the playing budget and sell players. And in my opinion, this has led to a rapidly declining team. Our best players have been sold, or have been refused competitive contracts. Howson was the most recent, but players like Snodgrass look set to walk if things don’t change while the likes of Clayton and McCormack are on the transfer list. You have to question why a manager who said of McCormack:

I thought about Ross on Friday night when Adam Le Fondre came on for Reading to score twice out of nothing and win them the game. You need a big squad, you need a good squad, and I see Ross playing an important part next season. Over the years we have relied on player sales to plug these gaps.

and who only listed Clayton because they could not agree terms (from what I hear it is more likely Aidy White who demanded £15k per week), would get rid of two important players from the team in the perfect world. Indeed, it smacks of more of the same: Warnock mentions the importance of a large, versatile squad, Bates expounds how our squad is too large (for the record, it was average). Player sales balance books and the lack of numbers in the squad pays for a slightly better quality coming in. Which is great… unless they get injured.

Neil Warnock has had to virtually pull teeth to find enough money for Jason Pearce and two Bosmans. While the club is still profitable, it is being sapped of its profit to fund Yorkshire Radio, the Pavilion into the £millions. As LUST put it at the meeting:

The football side of the business is a cash-cow that is funding numerous loss-making businesses

The football side is funding failing businesses.

Leeds’ finances look depressing from what we can see, but that’s a good thing. Leeds United needs to be sold, whether in part or completely. Change will happen. It’s all a matter of time. When change happens, L.U.S.T. believe it is likely the new owners will have funds ready to allow Warnock a more realistic tilt at the title. Until then, all we can do is wait!