Leicester City have announced huge losses of £89.7 million for the 2022/23 season, and are already under pressure to avoid further sanctions next year.
Following relegation from the Premier League last season, Leicester are facing fresh doubts over their ability to comply with Profitability and Sustainability Rules (PSR) after a second successive financial year of significant losses.
Leicester reported record losses of £92.5 million last year, and the latest set of accounts have been released shortly after they were charged with a breach of PSR by the Premier League.
With top-flight clubs limited to losses of £105 million over a rolling three-year period, Leicester will inevitably have to raise money through player sales before June 30 to avoid breaching for the 23/24 season.
Leicester have already been placed under a transfer embargo by the EFL which has heightened concerns that they are already in breach for this year in the Championship.
Currently third in the Championship, Leicester are facing a potential points deduction next season whatever division they will be operating in, after last month’s charge.
King Power, the club’s ownership, insist they are fully committed to Leicester and their financial position is “secure.”
This year’s accounts are attributed to many factors including relegation, the “unplanned expenditure” of sacking £8 million-a-year manager Brendan Rodgers, plus an estimated £30 million deficit from finishing 18th in the table below targeted expectations.
Crucially, Leicester also say that last season they had the largest combined employment costs and player amortisation in the Premier League outside of the traditional ‘Big-Six’ clubs.
The accounts include the sales of Wesley Fofana (£70 million to Chelsea) and James Maddison (£40 million to Tottenham). England international Maddison’s sale was completed on June 28 last year to be included in this reporting period.
Leicester have said the accounts are not a definitive PSR figure but a calculation, and they remain in dialogue with the Premier League and EFL.
Permitted add-backs, which are costs recognised to be in the general interest of the club, are included such as expenditure towards women’s football, community development and the academy.
Following relegation, Leicester offloaded several high earners while the remaining players took wage cuts between 35 to 50 per cent.
Aiyawatt Srivaddhanaprabha, the club chairman, said: “I want fans to be assured that the club’s financial position is entirely secure and that my personal support for Leicester City, and that of King Power, remains as strong as it has ever been.”
Srivaddhanaprabha has also converted £194million of loans and related interest owed to King Power into equity, relieving Leicester of big debts to its parent company.
However, these latest figures will trigger concerns over the club’s ability to comply with regulations over this financial year and the next one. The total losses over the past three years total £215.3 million.
The Football League’s financial reporting unit has already raised concerns over information submitted last year for this season. Though the EFL failed to impose a business plan on the club, they have since placed them under a player registration embargo.
Many Championship clubs are demanding sanctions as they insist Leicester’s promotion challenge has been established with an unfair sporting advantage.
Leicester were charged by the Premier League on March 21 with a breach of PSR and have insisted that they will base their defence on the mitigating circumstances.
With leading sports lawyer Nick De Marco KC on board, the club are expected to argue that it was a unique set of factors which resulted in the £89.7 million loss before and after taxation.
After finishing fifth [twice] and eighth in the previous three seasons, they insist that last season’s finish was “a disappointing and unanticipated decline in sporting achievement.”
Leicester’s chief executive, Susan Whelan, said, “After a sustained period of growth and success for the club during the last decade, the 2022/23 season was a significant setback, the consequences of which will be felt for some time.
“We must now focus on rebuilding and seeking to return to and re-establishing ourselves in the Premier League. Having achieved finishing positions in the Premier League of fifth, fifth and eighth in the three preceding seasons, our targets and associated budgets for 2022/23 were entirely reasonable.
“However, for a club such as ours, whose sustained sporting achievements have justified the levels of investment required to compete with the most established clubs and pursue our ambition, a season of such significant under-performance on the pitch presents financial challenges, particularly from the perspective of the game’s current Profitability and Sustainability rules.”
Leicester were the fourth club to be charged by the Premier League for breaching financial controls, following Manchester City, Everton and Nottingham Forest.
Under head coach Enzo Maresca, Leicester have seven games left in the Championship season and are competing with Leeds and Ipswich for the two automatic promotion places.
