Kinsbergen and Slop Slip Up

Kinsbergen and Slop Slip Up

09/27/2014

Yesterday Ajax announced the financial results for season 2013-14 and via this link there is an explanation from directors Michael Kinsbergen (general) and Jeroen Slop (financial).

The biggest misser is in the last paragraph. Kinsbergen explains that the management works with a multi year plan in which the attracting and keeping talented youth players is a key element. As an example Kinsbergen indicates the performance of Ajax in 1995, winning the Champions League, is still one of the possibilities. As a further argument why this is still a possibility Kinsbergen indicates that according to his knowledge the Ajax team that won the Champions League was 21.8 years old. Sounds convincing, 21.8, but it is nowhere close to the truth. The starting lineup of the Ajax team in the final was on average 25 years old.

In the center of defense Ajax had two thirty plus year olds with Danny Blind and Frank Rijkaard en next to them with Edwin van der Sar, the brothers De Boer, Jari Litmanen and Finidi George there were also several players in the 24-25 age category. Michael Reiziger, Edgard Davids, Clarence Seedor and Marc Overmars also started. Only Clarence Seedorf and substitutes Patrick Kluivert and Nwankwo Kanu were younger than the made up age of 21.8 year.

In my eyes it is irrelevant to make a conclusion just based on the average age of a team, about whether or not Ajax can still win the Champions League, but it is quite troublesome that such a crucial mistake was made in an assumption.

Back to the explanation of the financial results. Kinsbergen starts with some remarks about how the numbers reflect the results on the pitch, and explains why there are some small differences in comparison to the previous season.

Slop gives an irrelevant fact as a reason why Ajax does not spend more. Purely because of the way Ajax reports the figures the balance contains one post called Overige Reserves that contains the nett loss since Ajax went public. Slop indicates it is not wise to have any new financial commitments as long as this post still contains a negative amount, but a negative amount on that post is irrelevant in itself. It is a bookkeeping choice to keep the post Agio of 100 million erip as a separate post under the Eigen Vermogen. It is even the case that up till season 2005-06 Ajax had grouped these posts and few more together under Eigen Vermogen, so those seasons there was no negative amount in the books. If Ajax, with the financial reporting methodology they currently use, get the Overige Reserves to 0 or even positive this only means that Ajax no longer has a nett loss since going public, nothing more, nothing less.

What would be a lot more interesting to determine whether extra expenses are possible is how stable the good financial results over the post years are. However there is no attention to this at all. There are two large unknown factors regarding the income, the income related to the Champions League (27.6 million) and transfer income (21.9 million). Because this is such a large part of the total income there is absolutely no guarantee that the financial results of the years to come will be positive. Transfer incomes will likely not disappear completely (although it is likely that because Ajax has sold a lot of experience in the past seasons, the transfer income will become less), but if Ajax does not reach the Champions League those incomes will disappear completely with almost nothing as compensation (the Europa League incomes are very minor in comparison), although because the bonusses Ajax pays are based on reaching the Champions League, the costs will be lower as well.

In my opionion there is reason enough not to increase the transfer expenses. The 15 million that has been spent at least on new players in season 2013-14 (this can be concluded from the 9.3 million Afschrijving Vergoedingssommen, while the balance post Vergoedingssommen increased with 5.6 million, where we write at least because we assumed that the players that were sold were for 0 euro on the balance) is already quite high. 15 million is not really typical as amonst others Van der Hoorn and Duarte were transferred after July 1, 2013 and Viergever and Zivkovic before June 30, 2014, but the amount is still high.

It is also a bit weird to see that Ajax is considering to spend more money on transfers, while so many of the players that are transferred hardly have any added value for Ajax 1. Perhaps in that light it is better to focus on finding a way to get more result out of the current spending instead of increasing the spending.

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