Financial grounding to Leicester sacking Claudio Ranieri

The financial context for Leicester City's sacking of Claudio Ranieri has been highlighted in the club's 2015/'16 accounts, which show record income of £129 million (€150m) over the year City sensationally won the Premier League title.

That revenue, a 24 per cent increase on £104m made the previous season, was boosted by £95m in TV income alone, with much of the extra millions earned from the additional money paid to clubs for each place they finish in the table.

Having made a £21m loss when achieving promotion from the Championship in 2013/’14, incurring an undisclosed sanction from the English Football League under financial fair play rules which they continue to dispute, Leicester made a second successive pre-tax profit in the year ending May 31st, 2016 (£16m), following a profit of £26m in 2014/’15.

The club’s wage bill for Ranieri’s title-winning season was £80m, an increase of over 40 per cent from £57m in 2014/’15, and the accounts state that last summer Leicester agreed fresh contracts with key players and spent a net £48m on new players, with Islam Slimani, the Algeria striker bought from Sporting Lisbon, the most expensive at £30m.

Champions League last 16: Four storylines to watch out for

---

Michael O’Neill would be ‘tempted’ if Leicester make offer

---

Katie McCabe’s stunning strike helps Ireland to top spot

---

Ibrahimovic and Mings charged over Old Trafford incidents

---

This season is the first of the Premier League’s even more lucrative three-year TV deal until 2019, in which its 20 clubs are sharing £2.8bn per season, estimated to be worth £100m even to the club finishing bottom.

Parachute payments

That figure drops spectacularly for clubs relegated into the Championship, with parachute payments from the Premier League to ease the financial shock in the first year worth only around half of the previous season’s TV income, and dwindling after that.

The financial importance to Leicester of retaining their top-flight status is emphasised throughout the accounts, as is a willingness to sack a manager when prospects are dropping.

“Membership of, and finishing position in, the Premier League have a highly material impact on the revenue streams and cash generation of the club,” the accounts state, noting the club has to “make prudent budget assumptions” and guard against the risk of underperforming. “The directors also monitor the performance of both management and players and have a proven record of making changes where required.”

A run of five straight defeats in the Premier League after a 0-0 draw at Middlesbrough on January 2nd had sunk Leicester to just above the relegation places when the directors, led by the chairman Vichai Srivaddhanaprabha, the owner of the King Power group of Thai duty free companies, decided to sack Ranieri, a move widely met with outrage at its perceived ruthlessness.

Since then, the caretaker manager, Craig Shakespeare, has led the team to two straight 3-1 victories, over Liverpool and Hull City, which have lifted the club to 15th, five points clear of the teams in the relegation zone.

Arbitration process

The accounts note Leicester continue to challenge in an arbitration process the Football League's sanction for the loss recorded in 2014, which was reduced from £34m the previous year largely due to an upfront payment on a sale Leicester announced of its marketing rights to a company called Trestellar Ltd. That company was set up by the son and daughter of the former Premier League chairman Dave Richards, who had previously been reported to be advising Leicester on complying with financial fair play rules.

Trestellar sold the naming rights to the stadium and shirt sponsorship to King Power, which had already previously been paying directly for those rights.

Leicester are not specifically contesting the Football League’s assessment of its 2013/’14 accounts, which is presumed to include the Trestellar deal, but challenging the legality of the FFP rules themselves.

“The club’s directors believe [the regulations] to be unlawful and the directors are confident no material liability will arise from this process,” the accounts state.

A Football League spokesman confirmed the legal argument is “ongoing” but said he could not comment further, football’s arbitration rules require parties to keep the proceedings permanently confidential.

Guardian Service