The pain of restructuring squad will be worth it says Liverpool MD as club posts £40m loss
Liverpool managing director Ian Ayre insists the "pain" associated with the cost of restructuring the squad will be worth the effort after the club posted losses of £40.5million.
The club's debt rose by £21.8million to £87.2million in the 10 months between August 1 2011 to May 31 2012 - a restructured period designed to bring alignment with the football season.
However, the loss was less than the £49.3million made the previous year and done against the backdrop of no European football, although Liverpool did get to two cup finals, winning one.
Some of the deficit was as a result of investing heavily in the transfer market - and the costs associated with bringing in the likes of Stewart Downing (£20million) and Jordan Henderson (£16million) in the weeks preceding the accounting period - while offloading other players at a loss.
But with the club's owners Fenway Sports Group firmly focused on the impending arrival of Financial Fair Play Ayre stressed there was necessary work to be undertaken.
"The key message for me is that we are continuing to transition to the point we have been working on for several years under this ownership - which is to continue to improve revenues and manage our cost base effectively," he said.
"The biggest cost base without doubt is player trading and player wages - but these accounts demonstrate that we are still working hard to improve that.
"I take comfort in the fact that the work we have done, some of which costs us a lot of money in this period and beyond, looks pretty painful at the time.
"But as long as you invest in it and manage it in the right way, then hopefully it bears fruit as we go forward and gives us a better platform to exist on in a different environment and in a world where we are expected to break even.
"You never take comfort from any business that makes a loss but I am pleased that we're making the progress we are making."
In the period relating to these accounts the club offloaded 11 players, including the likes of Milan Jovanovic, Christian Poulsen and Raul Meireles - all signings by previous managers.
The then boss Kenny Dalglish - the cost of whose sacking last May was included in £9.5million of "exceptional payments" - wanted reinforcements for his squad and that meant players had to be moved on to make room.
"We see a big charge within the accounts for amortisation (depreciation in value) of players that have been disposed of within the period that perhaps came in on a higher cost," Ayre told the Liverpool Echo.
"We've made losses as a result of selling them but at the same time we've improved our longer-term position in terms of our wage bill by reducing the wages for those particular contracts.
"These accounts show investment in the squad - players like Jose Enrique and Sebastian Coates - and as we have seen in accounts that flow from that - we will continue to invest in the squad both for improved playing performance but also a far better structure in deals that we have with players.
"So we are fortunate in some sense in that we know we are improving in this year and we are continuing to improve."
In addition to transfer-related costs captain Steven Gerrard and Luis Suarez were among five players who signed new contracts during the accounting period, since the end of which FSG have injected £46.8million via a non-interest bearing intercompany loan.
Turnover increased by £5million but so did wages, with the salary bill now around £142million or 70% of income.
"It's good to see that even in a year where we have a downturn in fortunes by not playing European football, we can bolster our revenues by performing in other areas," added Ayre.
"It shows that we have a very strong and growing business that sits behind the football club.
"And as we approach things like Financial Fair Play and that type of environment, that puts us in a very strong position."
The figures do not include the record £25million-a-season six-year sponsorship deal with kit manufacturers Warrior, which came into effect last summer and could net the club a similar amount through associated merchandising.
"We've had record sales of their products throughout this year," said Ayre.
"We've also seen new sponsors come on board, notably Chevrolet and Garuda Airlines.
"If you have got a successfully performing team and you have got an infrastructure which we now have and the business ability to deliver revenue, then both of them coming together would be a fantastic solution for the football club all round."