Leeds United yesterday reported a loss of £7m for the last financial year, just hours after moving to the top of the Premiership for the first time this season.
The football club underlined its commitment to stay in the thick of the sport's big spending elite when it sold a 25-year bond to three financial institutions for £60m. The bond is secured on future match ticket sales and will be used to pay down existing credit lines of about £40m and to buy new players.
Peter Ridsdale, the chairman, said: "In football today you are only going to drive shareholder value by being at the top. If you are successful the step change in income fees is enormous."
The loss of £7m for the year ended 30 June, came after a pre-tax profit of £777,000 in the previous fiscal year.
The net loss on player trading – incorporating £18m to buy Rio Ferdinand from West Ham United, the most expensive ever transfer of an English player – soared five-fold to £12.7m from £2.6m. The loss came despite a near two-thirds rise in turnover to £86.3m. Spurred by the club's advance to the semi-finals of last year's Champions League tournament, broadcasting revenue more than doubled to £36.5m.
Other income areas also posted healthy gains. Gate receipts grew 29 per cent to £15.5m, while merchandising, travel and other commercial revenue rose 53 per cent to £34.2m.
The club was also hit by a 56 per cent leap in payroll costs to £43.3m. Leeds executives acknowledged that wage inflation would continue in the current year but that they hope to stabilise the increase at around 30 per cent.
Football's puzzling sums have wrecked havoc on the share prices of most clubs, Leeds proving no exception. Its shares fell a half-penny yesterday to 9.75p – just one-third of their peak value last year – a price which values the club at £34m.
Nigel Hawkins, an analyst with Williams de Broe, said: "I think the market is being a bit short-term. There may be a bit of a shortfall in this year's numbers but Ridsdale's long-term strategy is sound."
Indeed, the chairman said that the proposed new stadium, budgeted at £60m, will not cost the club a penny. Mr Ridsdale said the City of Leeds local authority would contribute land and services worth nearly £20m, while the club would raise more than £40m from the sale of the Elland Road site and from naming rights for the new ground.