Championship Archives - FINANCIAL FOOTBALL NEWS

July 1, 2019July 1, 2019

Championship 2018 Finances – Revenue

2018 was another unpredictable season in the Championship with Wolves’ mega spending seeing them clinch promotion and the title. However, Cardiff were the surprise package, sealing the other automatic promotion spot while Fulham went up via the play-offs.

At the bottom of the table it was misery for Sunderland who were condemned to back-to-back relegations alongside Barnsley and Burton to League One.

However, this article is about finances, and more specifically revenue and which clubs are bringing in the cash and who is in desperate need of some.

Revenue actually fell from £893m to just £701m (22%), primarily due to the relegated clubs who saw their revenue drop by a combined painful £181m! Excluding these clubs from the analysis leads to only a 2% drop in revenue which is still a concern.

This is fall is largely driven by falls in broadcasting revenue as due to poor cup campaigns for many clubs and also a general fall in the commercial appeal of clubs in England’s second division which has only widened the Chasm between the Premier League and Championship.

To compare, Premier League clubs earned nearly 7 times as much as Championship clubs in 2018, showcasing why Championship clubs have been going for broke with unsustainably high wages as of late, gambling on reaching the big time and big bucks.

The average revenue of a Championship clubs is only £32m compared to roughly £240m among Premier League clubs! This average falls to a measly £27m when excluding the relegated clubs who benefit significantly from parachute payments following their relegations.

Please note that Bolton are yet to release their finances due to their ongoing financial troubles while Sheffield Wednesday have so far yet to file their accounts which are long overdue.

Revenue Rumbled

As mentioned, Championship revenue fell by 22% to £701m due to the drop in revenue of the relegated clubs. This drop does fall to 2% when excluding those clubs however still points to a revenue slow down which will be a concern to many Championship clubs and their owners who are leaking money due to high wages.

Let’s start with those relegated clubs, Hull (£56m), Middlesbrough (£62m) and Sunderland (£63m) saw their revenue fall by 52%, 49% and 49% respectively following relegation, losing out on incredible £181m in the process, showing the huge immediate costs of relegation.

And this isn’t even the end of it, parachute payments will continue to fall, further hurting revenue unless a quick return to the Premier League is secured.

Other big revenue losers were Reading (£18m), QPR (£31m) and Norwich (£62m) who all saw heavy reductions in the above mentioned parachute payments, leading to drops in revenue of 51%, 35% and 18% respectively.

On the end of the scale were Sheffield United (£20m), Millwall (£16m), Bristol City (£26m) and Cardiff (£33m) for all too different reasons.

Sheffield United and Millwall benefitted from promotion back to the Championship which helped them revive their dwindling commercial appeal after both secured top half finishes, increasing their revenue by 75% and 56% respectively.

Bristol City saw a sharp uptake in revenue of 23% due to a remarkable run to the EFL cup semi finals that significantly boosted revenue after a giant-killing win over Manchester United caught everyone’s attention.

Lastly Cardiff saw a 21% boost in revenue after securing promotion. This increase however pales in comparison with the riches they will gain from promotion despite an immediate return to the Championship.

Outside of this, Leeds (£41m), Fulham (£38m) and Wolves (£26m) all experienced double digit growth as they began returning to prominence. Likewise, Burton (£13m) and Barnsley (£14m) also experienced double-digit growth from their lowly revenue figures.

Aston Villa (£69m) on the other hand saw revenue fall by 7% after another season in the Championship. This will fall further in 2019 following a drop in parachute payments, however a timely promotion has saved the day.

Matchday Money

Championship clubs saw a 4% drop in matchday revenue to £143m after poorer cup runs by the majority and a fall in fan appetite that saw attendances fall and spending on matchdays decrease.

Matchday revenue is largely driven by attendances and stadium capacity so its no surprise that the biggest earners are Leeds (£17m), Aston Villa (£12m), Norwich (£10m), Derby (£9m) and Sheffield United (£9m) who all have stadiums with capacity exceeding 27,000.

On the other end of the scale are Burton (£2m), Brentford (£3m), Barnsley (£4m) and Reading (£4m), who all have stadia with capacity below 24,000. Burton (6,200) and Barnsley (12,763) are significantly constrained by their stadium size. However, worryingly for Brentford and Reading, their stadiums exceed 20,000 and therefore shows a lack of fans at their games.

Matchday revenue accounts for 21% of revenue for Championship clubs and is a relatively stable income stream with attendances not varying much year on year. However, fan engagement is lessening with fewer fans attending games due to a lack of enjoyment and/or more games on TV.

Championship clubs going forward are going to struggle to attract fans and meaningful matchday takings due to many younger fans opting for Premier League top sides even where this isn’t their local team unless something is done to prevent this soon.

EFL Earnings

Broadcasting revenue makes up 57% of Championship club (falling to 49% without Premier League relegated clubs), making it their most importance form of revenue. Championship clubs gain this revenue from the EFL for Championship and League Cup performances and also receive cash from the FA Cup.

Not taking into accounted those relegated clubs, broadcasting revenue fell by 11% as parachute payments fell for those clubs relegated within the last 3 years, while Championship clubs faltered in the cups.

Unsurprisingly the three relegated clubs Hull (£46m), Middlesbrough (£47m) and Sunderland (£48m) had the highest levels of revenue due to significant parachute payments. Despite this, their revenue dropped by 51%, 54% and 49% respectively, showing the huge costs of relegation.

More positively, Barnsley (£8m), Bristol City (£8m), Millwall (£8m), Nottingham Forest (£9m) and Sheffield United (£8m) all experienced double digit growth in revenue, with Sheffield United seeing a 406% growth in revenue following promotion!

Burton would have also experienced significant growth in broadcasting revenue, however they have combined both broadcasting and commercial revenue together (£11m) so cannot be analysed.

Aston Villa (£40m), Norwich (£40m), QPR (£20m) and Reading (£8m) all experienced big falls in broadcasting revenue after their parachute payments were reduced once again, with both QPR and Reading at the end of their cycle.

The average broadcasting revenue among clubs not receiving parachute payments is around £8m compared to the £100m minimum available in the Premier League, showing why clubs and their owners go for broke to reach these riches.

However, a new EFL deal was agreed in 2018 for £595m for five years, a 35% increase. This will increase broadcasting revenue for Championship clubs going forward and slightly narrow the wide chasm between the Championship and Premier League.

Commercial Pittance

Commercial revenue makes up a fifth of Championship club’s revenue and is the main area for growth that the clubs can directly affect.

Many Championship clubs have huge followings due to the history behind their clubs. This history and fan base of these clubs could be better utilised and exposed to boost commercial revenue by many of these clubs.

Commercial revenue did in fact fall by 2% to £143m, a total less than the individual commercial revenue earned by Chelsea, Liverpool, Manchester City and Manchester United each.

The biggest earners commercially are Aston Villa (£17m), Leeds (£17m), Norwich (£12m) and surprisingly Bristol City (£10m) after their League Cup exploits. These 4 all earned more commercially than Bournemouth, Brighton, Burnley, Huddersfield, Stoke and Watford, showing the huge commercial appeal they have considering their league status.

Aston Villa will only grow further following promotion and will be hoping to get back towards their all-time high commercial revenue of £31m in 2014 and 2016.

On the other hand, many clubs in the Championship struggle to drum up commercial interest. Barnsley (£1m), Brentford (£2m), Hull (£3m), Millwall (£2m), Preston (£3m) and Sheffield United (£2m), all take well below the levels Championship clubs should be, especially considering some of the history and fan base of many of these clubs.

Of the clubs promoted that season, Wolves (£9m), Fulham (£9m) and Cardiff (£6m) should all see sharp rises in commercial revenue into the double figures, although Cardiff and Fulham’s relegations may put pay to that.

The declines of Ipswich (£4m) and Sunderland (£7m) will see their commercial revenue continue to plummet.

All in all, this is the biggest area of opportunities for Championship clubs. As more and more games are shown on TV and the quality continues to improve, sponsors are going to show further interest in the right clubs so long as they can capitalise.

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June 18, 2019June 18, 2019

Championship 2018 Finances – Wages

At the bottom of the table it was misery for Sunderland who were condemned to back-to-back relegations alongside Barnsley and Burton to League One.

However, this article is about finances, and more specifically wages and which clubs are teetering on financial ruin (most of them) and which clubs are being financially sensible (hardly any).

The 2017/18 season saw record levels of wages as the year on year growth in player salaries continued due to lure of the riches of the Premier League which saw financially gambling at large by owners.

Wages increased from an already high £693m to £748m, an 8% increase and the equivalent of an extra £1.1m a week in wages.

This is even more outstanding in context, Championship clubs’ combined revenue was only £701m, meaning clubs as a whole were losing money after just paying wages, not taking into account all other expenses a club faces, showing the huge financial issues clubs are facing in trying to compete.

The average wage bill of a Championship club is £34m (or £654k a week), ranging from £10m to £73m, showing the vast difference financially between many of the clubs, partly due to those clubs relegated.

This average increases to £54m across the top 6, showcasing that high wages do in fact correlate to some degree to position, although it is worth noting that at the bottom, the average falls to £28m (excl. Bolton), which isn’t far below the average of the whole league, showing that wages do not really decide much outside those at the top in terms of final league position.

Please note that Bolton are yet to release their finances due to their ongoing financial troubles while Sheffield Wednesday have so far yet to file their accounts which are long overdue.

The Big Spenders

The big wage spender was Aston Villa in 2018, with their much publicised near financial destruction caused largely by spending a huge £73m on wages, this was partly helped by bringing in £69m (due to parachute payments).

Outside of this, Fulham (£54m), Norwich (£54m) and Wolves (£51m) all spent in excess of £50m on wages as Fulham and Wolves successfully secured promotion by big spending, although it is worth noting that these wages include significant promotion bonuses which wouldn’t have been payable without promotion.

Norwich’s wages were surprisingly high (after failing to reduce wages further following relegation two years ago) as they unsuccessfully gunned for a return to the Premier League, although they did manage it in 2019.

Modest Means

The less fortunate of the Championship teams this year were Burton (£10m), Barnsley (£11m), Millwall (£13m), Preston (£15m), Brentford (£17m), Ipswich (£19m) and Sheffield United (£19m) who all spent less than £20m on wages.

Unsurprisingly, Sheffield United and Millwall are near the bottom having both been promoted from League One the previous season and top half finishes for both far exceeded their modest budgets.

Barnsley and Burton were unsurprisingly relegated with their meagre budgets, doing well to survive in the prior season, with wages way below the average in the Championship.

Brentford, Preston and Ipswich all massively exceeded expectations on their budgets by securing top half finishes with Preston missing out on the play-offs by 2 points to a Derby County side who spent over triple their wages (£47m).

Best of the Rest

Everyone else is somewhere in between this gulf and we are going to have a look at a few of the more notable wage bills.

The relegated Premier League clubs all had relatively high wages but were not right at the top as Middlesbrough (£49m), Sunderland (£47m) and Hull (£31m) all successfully cut their wages following relegation to try and get their finances in order.

Cardiff’s wage bill was relatively high at £48m, although promotion was secured making the expense more than worth the risk.

Birmingham (£38m), Reading (£35m) and QPR (£31m) all flirted with financial disaster with high wages that massively exceed their lowly revenues and league positions and will need to be addressed going forward to avoid further financial issues and Financial Fair Play penalties.

Leeds continue their resurgence with surprisingly modest wages considering the talk around the club, spending a respectable £31m, although this is likely to be considerably higher under Bielsa in 2019.

Wage growth

There was a mixture of growth and declines in wages with 16 out of the 22 teams analysed experiencing some level of wage growth.

Sheffield United were the big movers with wages nearly doubling from £10m to £19m (90%) on the back of promotion. Despite this huge jump, the increase still left them near the bottom of the wage bills in the Championship as a £173k a week extra in wages is a lot less of an increase than many of the clubs.

Wolves unsurprisingly saw a huge increase in wages due to the special relationship they now have with Jorge Mendes under their new ownership and new star players. Wages increased from £28m to £51m (80%), a huge extra £433k a week in wages as they plotted their promotion.

Birmingham (71%) and Cardiff (67%) both showed renewed levels of ambition that saw wages increase by £304k and £373k a week and experienced very different experiences from their new high-earners.

Leeds began their new era with an increase in wages of 52% to £41m, an extra £206k a week in wages.

Aston Villa increased their wages by 19% and £223k a week despite their unravelling finances with the board unable to see the issues (or recklessly gamble) until it was nearly too late.

On the other end of the scale, Hull saw wages drop by 49% to £31m following relegation, saving a huge £581k a week in wages as they looked to get their affairs in orders.

It was a similar picture for Sunderland who dropped wages by 43% to £47m, saving £691k a week in the process, a figure that will need to reduce once again in League One.

Middlesbrough cut wages by a quarter (25%) on the back of relegation, saving a more modest £312k a week as they looked to keep some players and gain promotion straight back to the Premier League, being unsuccessful with that to date.

Financial Instability

The wage to revenue ratio measures financial sustainability and prudence. If the ratio exceeds 100%, a club is spending more on wages than the revenue they bring in, which means the club is loss making before taking into all other costs they face, a situation that will lead to financial ruin in the long run.

The higher the ratio, the less profitable a club can be and the less sustainable they are. A club’s wage/turnover ratio should be around 60%, with one higher than 90% largely unsustainable and one lower than 40% a poor use of resources and essentially ‘too safe’.

Figures in excess of 100% are financially reckless and will be expensive for the owners as they have to fund large losses (unless players are sold).

The average in the Championship was a suicidal 115% in 2018, ranging from 56% to over 200%.

The lowest by a distance was Hull at 56% after successfully cutting wages following relegation and benefitted from parachute payments, although these will fall next season and this ratio will rise.

Sunderland (74%), Barnsley (76%), Leeds (77%), Burton (78%) and Middlesbrough (79%) all had ratios below 80% which is just about okay for financial sustainability. These ratios were all from clubs who were either relegated or promoted to the Championship, a usual trend.

Birmingham increased wages by 71% and this led to a wage/revenue ratio of 202%, meaning they are spending more than double their revenue on wages, hardly a good idea! This is likely to bring on various Financial Fair Play issues (as seen by their point deduction) as well as a burning hole in their owners’ pockets.

Other clubs at huge financial risk at their current wage and revenue levels are Reading (197%), Derby (161%), Brentford (135%), Nottingham Forest (122%) and Preston (113%) who are all putting themselves at risk of prolonged heavy losses and Financial Fair Play penalties.

Wolves (192%), Cardiff (148%) and Fulham (142%) all have high ratios that are skewed due to heavy promotion bonuses, although it is likely to still have been in excess of 100% without them, showing they were also playing with financial fire, however were more successful with their gamble.

All in all, Championship clubs are risking their financial future more than ever in an attempt to reach the Premier League promised land where riches await. However, as always only three clubs can reach their goals each year, leaving 10 to 15 teams disappointed and at significant financial risk.

It will be interesting to see how the EFL reacts to these increased financial gambles and the clubs who continue to side step Financial Fair Play sanctions by playing the rules.

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June 14, 2019June 14, 2019

Championship 2018 Finances

Have a look at the finances of all Championship clubs from the 2017/18 season!

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Aston Villa – Financial Limbo

Barnsley – Relegated But Ready

Birmingham City – Midland’s Mess

Bolton – Unavailable due to Administration

Brentford – Much of the Same

Bristol City – Robins in Red

Burton – Living Within Your Means

Cardiff – The Promotion Penalty

Derby County – Pride Park Profits

Fulham – Craven Losses

Hull City – The Cost of Relegation

Ipswich – Out of Gas

Leeds United – New Era

Middlesbrough – Riverside Reeling

Millwall – The Lions Roar

Norwich City – Canaries’ Cash

Nottingham Forest – A New Era

Preston – Profits but no Play-Offs

QPR – FFP Hits

Reading – Royals Flushed

Sheffield United – Blades Cut Losses

Sheffield Wednesday – Accounts are overdue and are yet to be released – To be updated

Sunderland – Back to Back

Wolves – Financial Fosun Play

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June 14, 2019June 14, 2019

Burton Albion FC’s 2018 Finances – Living Within Your Means

Burton suffered from second-season syndrome after being unable to upset the odds again and survive for a second season in a row in the Championship, finishing 23^rd.

It was always going to be an uphill struggle due to their shoestring budget, however they fought valiantly and were narrowly relegated by 2 points.

Burton didn’t fare much better in the cups but did enjoy a lucrative tie in the EFL Cup at Old Trafford, ending in a 4-1 defeat to Manchester United. Burton were also eliminated from the FA Cup in the Third Round.

Relegation and rising costs saw profits fall from £1.2m to £0.4m (67%), which is still more than the majority of Championship clubs who run themselves a lot less sensibly (financially).

Let’s delve into the numbers.

Revenue Analysis

Burton’s second season in the Championship ending in relegation didn’t stop revenue from rising, increasing from £11.4m to £12.9m (13%).

Matchday revenue rose from £1.5m to £1.8m (20%) despite average attendances falling from 5,227 to 4,645 (13%) due to lucrative cup ties and increased ticket prices. A sensational run to the EFL Cup Semi-Finals should boost matchday revenue once again.

Broadcasting & Commercial revenue rose from £9.9m to £11.1m (12%) on the back of increased EFL Championship distributions despite a lower finish and the lucrative tie with Manchester United in the EFL Cup.

Commercial revenue also benefited from a second successive year in the Championship.

Looking ahead, Burton were unable to bounce straight back to the Championship and revenue will be hit significantly as a result.

The lower prize money in League One will see broadcasting revenue fall significantly. This will however be offset slightly by their EFL Cup run.

Revenue will however take a beating and will fall by around half to £5-6m most likely.

Costs Analysis

Burton saw costs grow at a faster rate than revenue, hurting profitability. Costs rose from £10.2m to £13.3m (30%) as the increased costs of remaining competitive in the Championship continues to rise.

Amortisation increased from £350k to £475k (36%) which is still very low for a Championship club. The rise was largely due to an increase in transfer spending, with Burton not spending transfer fees for a while prior to promotion ahead of the 2016/17 season.

Burton had a net interest income of £1.7m, a huge change from the net interest expense of £0.2m in 2017. What this interest income relates to is unhelpfully not disclosed and is likely to relate to transfer fee interest receivable on instalments (unlikely due to the lack of previous transfers) or loans to their owner (although this should have been disclosed in the accounts).

Burton paid tax of £105k on their profit before tax of £500k, an effective tax rate of 20%, in line with the corporate tax rate of 19%.

Burton saw wages rise to record levels, breaking the £10m barrier as wages increased from £7.7m to £10.0m (30%) as players were rewarded with bonuses and new contracts on the back of survival last season and new signings commanded higher wages.

This wage rise works out at a measly extra £44k a week, showcasing the tight budgetary controls Burton work under, showing what an achievement it was to even survive last year!

Directors of the club were paid £63k, having received no renumeration in 2017.

Looking ahead, costs will fall out of necessity after relegation as key players leave and relegation wage drop clauses come into effect. With revenue likely to halve, Burton will be hoping costs go someway to covering that, although it is almost certain Burton will make a loss of at least a couple of million in 2019.

Transfers Analysis

Burton are a club of modest means, working tirelessly and above expectations on a small budget and 2018 was no different as the club spent a tiny £0.5m on one player, which was all recouped and then some by one sale.

In came Liam Boyce for £0.5m and out went Jackson Irvine for £1.9m, a net transfer income of £1.4m after a net transfer spend of £0.3m in 2017.

Liam Boyce proved a decent signing, chipping in with some crucial goals in their relegation battle although Irvine was missed throughout the season.

The sale of Irvine netted Burton a profit on his sale of £0.8m, a vital amount in keeping Burton in a profitable position.

In cash terms, Burton spent £1.1m (of which much relates to prior periods) and received £1.3m (further cash will be due although not disclosed in the accounts), a net cash inflow of £0.2m.

The sale of Irvine helped Burton record a profit and with no such sales in 2019, Burton are set to make a loss before taking into account the fall in revenue due to relegation.

Debt Analysis

Burton saw cash levels completely depleted after a difficult season, falling into their overdraft as cash of £0.8m was wiped out.

The cash was used to fund their loss (before taking into account transfers) and to pay for improvements to the club’s infrastructure of £0.5m (although this was down from £1.3m in 2017).

Debt levels remained at £0.1m, being their overdraft facility. Their owner has run the club debt-free, placing no loan burden on Burton as the club continue to live within their means.

This is a noble practice but makes future growth difficult without further investment and with rising costs, remaining profitable in the Championship, let alone League One, is become more onerous by the season.

Burton fans will be hoping for at least some injection of funds going forward to push back into the Championship and hopefully stay for a while this time. Without it, Burton risk a prolonged and unprofitable stay in League One for some time.

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June 13, 2019June 13, 2019

Bristol City FC’s 2018 Finances – Robins in Red

Bristol City had a solid 2017/18 season, finishing 11^thin a strong Championship campaign which gave fans hope of a potential play-off place before eventually finishing a few places short.

Fans were however ecstatic after a sensational run to the EFL Cup Semi-Finals before ultimately succumbing to a 5-3 aggregate defeat to Manchester City in a valiant effort by The Robins.

The season will fondly be remembered by their fans after beating 3 three Premier League teams on their cup run, including a shock win over Manchester United.

Despite a good season, losses tripled from £6.3m to a record-high of £25.2m (300%) due to rising costs and a the lack of profitable player sales compared to 2017, putting the club at risk of Financial Fair Play penalties as cumulative 3-year losses rose to £46.3m.

Let’s delve into the numbers.

Revenue Analysis

Bristol City saw revenue rise to record levels despite their rising losses, with revenue increasing from £21.2m to £26.0m (23%).

Matchday revenue was a major reason for the rise in revenue, increasing from £5.0m to £6.6m (32%) due to their EFL Cup run that netted the club 5 Premier League ties (including two legs versus Manchester City). This revenue was split as £3.4m (2017: £2.1m) of matchday revenue and £3.2m (2017: £2.9m) in season ticket sales.

Attendances also rose from 19,256 to 20,952 (8%) due to an upturn in form on the pitch in both the EFL Cup and Championship.

Broadcasting revenue rose from £6.8m to £7.8m (15%) due to additional prize money received from finishing 6 places higher in the Championship and the additional EFL Cup prize money.

Commercial revenue rose from £8.5m to £10.4m (22%) as the club benefitted from the exposure of their giant-killing status and an increase in commercial interest and merchandise sales.

Other revenue rose from £0.9m to £1.2m (33%).

Looking ahead, another solid season saw Bristol City narrowly miss out on the play-offs, finishing 8^thplaced and 4 points off the play-off places. Roles were also reversed in the EFL Cup with Bristol City shocked in the 1^stRound by Plymouth.

The increased Championship distributions and higher finish should see broadcasting revenue rise, while they also reached the Fifth Round of the FA Cup, which may be just as lucrative, if not more so than their EFL Cup run last year.

Matchday revenue is likely to fall due to less home games this season, while commercial revenue is likely to stabilise at around £10m. Overall revenue is unlikely to increase significantly.

Expense Analysis

Rising revenue was met by rising costs with expenses increasing from £39.7m to £51.2m (29%) as the costs to compete in the Championship continue to rocket due to the prize on offer with promotion.

The growth in costs (29%) was slightly higher than that of revenue (23%), harming profitability.

Amortisation increased from £5.2m to £7.8m (50%) due to the new level of spending the club are currently experiencing, spending £23.4m in the last two seasons compared to £7.5m in the five years before that.

Interest costs increased from £0.9m to £1.3m (44%) as interest costs on their overdraft and borrowing rose by £0.4m.

Wages rose significantly, increasing from £20.9m to £27.3m (31%) on the back of their new spending power and the influx of new players.

This wage increase worked out an extra £123k a week, relatively mediocre compared to other Championship clubs. The Championship continues to grow financially with clubs’ willingness to ramp up risk with high wages in the hope of gaining promotion.

Crazily, wages are more than revenue, which means Bristol City are losing money before taking into account any other costs, a financial unstable position that needs to be swiftly remedied and partly explains the sale of key players in 2018/19.

Directors on payroll at the parent company were paid slightly less this year, with renumeration falling from £115k to £109k (5%) despite improved results.

However, key management were paid elsewhere in the group and saw their wages rise from £1.0m to £1.4m (40%) due to these results.

Looking ahead, costs are likely to be at a similar level and may even fall after the likes of Reid, Flint and Bryan left freeing up wage savings that don’t seem to be have been used in full this year. The growing concerns of Financial Fair Play seem to have led to Bristol City curbing spending which may see an improved, more profitable team in the 2019 accounts.

Transfers Analysis

Bristol City saw their biggest transfer net spend to date in 2018, spending £12.1m and only bringing in £3.0m as 4 players arrived at Ashton gate and one departed.

In came, Diédhiou (£5.4m), Baker (£3.9m), Eliasson (£1.8m) and Walsh (£1.0m) for a combined £12.1m.

The only player to depart was Tomlin for £3.0m.

This led to a net transfer spend of £9.1m, up from a net transfer income of £1.4m in 2017.

The signings did okay with existing players leading the way in their promotion push with Diédhiou at least adding a few goals up front to supplement Bobby Reid who had a great season.

The sale of Tomlin netted Bristol City a modest £0.3m profit on player sales compared to the £13.6m recorded in 2017 due to the sale of Kodjia. This explains the majority of the increased losses, with the rest due to the larger rise in costs than revenue.

This loss is likely to be turned into a decent profit next year due to the sales of Reid, Flint and Bryan for sizeable profits.

In cash terms, Bristol City spent cash of £10.6m on transfers and received £7.3m, a net cash outlay of £3.3m, a manageable amount.

Bristol City are due a further £4.7m in transfer fees however owe £6.2m (£5.1m of which is due this year), a net creditor position of £1.5m which constrained transfer spending slightly in 2019 (although Financial Fair Play was a bigger concern).

Bristol City could also owe a further £0.3m in contingent transfer fees, however they could be owed £1.0m from other clubs themselves.

Debt Analysis

Bristol City operate with minimal cash reserves with their shallow cash pool depleted further, falling from £0.5m to £0.3m (40%).

Rising losses were funded with new funds of £19.0m comprising of £18.7m in capital from their owners and £0.3m in bank loans.

These funds were also used to fund their transfer spending and infrastructure improvements of £1.1m.

The funds provided by their owners were from an issue of new shares and hence are not repayable by the club as their owners show ambition by ploughing money into the club in the hope of promotion.

Debt levels hence increased ever so slightly, rising from £71.2m to £72.0m (1%), due to a £0.3m new bank loan and an increase in their overdraft.

Net debt levels hence rose from £70.7m to £71.7m (1%) as the majority funds were provided by equity, sparing the club from repaying them.

Going forward, further investment will be necessary for The Robins to gain promotion to the Premier League. Signs are mixed currently following the sale of key players in a bid to recoup previous spending and meet Financial Fair Play regulations.

The club are continuing to invest in their future. Following the successful redevelopment of Ashton Gate, Bristol City are at an advance stage in revamping their training ground which should help take them to the next level.

Bristol City are at a cross road on whether to push hard and take financial risk to reach the Promise Land, only time will tell which path they choose…

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May 5, 2019May 6, 2019

Sunderland AFC’s 2018 Finances – Back to Back

Sunderland endured their first season in the Championship since 2006 and it was severely unhappy one as Sunderland suffered back to back relegations after hitting rock bottom (literally).

A 24^thplaced finish concluded a turbulent campaign that saw 4 managers try and steer the club to safety to no avail as the Black Cats luck was well and truly out.

Off the pitch was just as bad, as losses doubled in size, increasing from £10.2m to £19.9m (95%) as their financial problems continued to mount, a problem that is now Mr. Donald’s following his purchase of the club which is in much need of a financial saviour.

Let’s delve into the numbers.

Revenue Analysis

Relegation from the Premier League was a costly one as Sunderland saw their revenue halve from £123.5m to £63.3m (49%).

Matchday revenue was on the decline, falling from £9.0m to £6.6m (27%) as fans left in their droves as average attendances fell from 41,287 to 27,635 (33%) as the doom and gloom around the club saw support fade.

Broadcasting revenue plummeted, dropping from £95.6m to £48.4m (49%) as the lack of Premier League football was felt financially. The drop was cushioned by parachute payments, although the amount received will fall next year and see revenue drop significantly once again.

Commercial revenue fell off a cliff, plummeting from £17.8m to £6.9m (61%) as relegation hit and the troubles surrounding the club scared off sponsors and saw lucrative deals fall away. Until Sunderland get their affairs in order, commercial revenue will continue at these low levels.

Other revenue increased from £1.1m to £1.4m (27%).

Looking ahead, revenue will drop significantly once again as Sunderland play in League One this year. An immediate return looked on the cards for much of the season but a fall into the play-offs means promotion is far from certain.

Regardless, broadcasting revenue will fall as both parachute payments fall, and the club receive League One TV money following one year of Championship income. Commercial revenue will once again fall as Sunderland’s status drops another notch.

Matchday revenue may stabilise at its current levels after a much more promising season means attendances were high.

Costs Analysis

Sunderland had to get used to their new reality with revenue dropping like a stone meaning their costs had to fall as well to avoid financial oblivion.

Costs fell from £162.7m to £83.9m (48%) almost mirroring the % fall in revenue, meaning profitability (or the lack of it) was hardly affected.

Amortisation fell from £29.4m to £10.5m (64%) as player investment ground to a halt as the club were forced into a negative net transfer spend for the first time in ages.

On top of this, poor signings and relegation led to some previous expensive signings being deemed worthless and leaving on free transfers which saw Sunderland record an impairment expense on these players of £12.4m.

Interest costs fell from £7.9m to £6.3m (20%) as bank interest fell as loans were repaid following their takeover.

Sunderland paid no tax due to their recent financial troubles and the losses this has created.

Wages nearly halved, falling from £82.7m to £46.8m (43%) as high earners departed and relegation wage drops came into effect.

This £47m of wages was still a fairly high wage for the Championship and therefore will be heads above the level in the League One and will once again need reducing.

The wage drop saved Sunderland £690k per week in wages, an unheard of drop in wages as Sunderland begun to shed years of poor signings and high wages that were far from deserved.

Surprisingly, directors saw their remuneration INCREASED despite the troubles the club find themselves in. Remuneration rose from £1.7m to £2.0m (18%) as the departing director was paid £1.1m to leave his role, lucky for some.

Looking ahead, costs will once again fall as further high earners leave after seeing out their lucrative contracts. Relegation wage drops will come into effect after the fall into League One while amortisation will fall following little player investment yet again.

Transfers Analysis

It was a busy window for Sunderland as they looked to offload deadwood and reduce wages.

In came Vaughan (£0.5m), Steele (£0.5m) and McGeady (£0.3m) for a combined £1.3m.

Out went Pickford (£25.7m), Mannone (£2.1m), Lens (Loan – £1.4m), Borini (£0.5m) and Vaughan (£0.3m) for a combined £29.8m, while a host of players left on free transfers.

This led to a net transfer income of £28.5m, the first time that has happened in recent memory.

The signings failed to galvanise a team low on confidence and morale, while despite the poor season, I don’t think those who left were missed as their heart was no longer in it.

McGeady is the one bright spark, beginning to show his quality this season.

The sales led to a profit on players sales of £6.6m, with the sale of Pickford included in last years accounts due to the accounts being to 31 July. A couple of this summer’s departures were hence also included in this figure.

Sunderland somehow still owe £18.6m in transfer fees (£15.1m due this year) as they continue to pay for past transfer mistakes. Sunderland are however owed £16.2m (£11.8m due this year), meaning they owe only £2.4m net which is still £2.4m too much at present.

This burden has further constrained their transfer activity as they need to pay off these transfers with cash they really can’t afford to spare.

Debt Analysis

Sunderland saw their sizeable cash balance depleted, falling from £35.7m to £11.2m (69%) as the losses mount and relegation sees their funds severely stretched.

On a debt front, Sunderland are relatively debt free following their takeover with all debt owed to the previous owner taken over by Mr.Donald and this debt was then written off by Mr. Donald.

The debt position this year is unclear following the takeover with the accounts not currently providing an accurate position of their debt, although I believe this to be minimal currently.

Going forward, further funding will be needed as Sunderland’s finances continue to worsen and their troubles will grow even more if promotion is not achieved back to the Championship this season.

A failure to gain promotion will see revenue plummet again and also mean further cuts to costs will be necessary, meaning Sunderland will become less and less competitive as they look to comply with Financial Fair Play and also avoid financial oblivion.

Hopefully for Sunderland, the owners are willing to invest and get the club through these hard times as if they can, he will have a legion of fans and a wonderful club at his hands.

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May 1, 2019May 2, 2019

Brentford FC’s 2018 Finances – Much Of The Same

Brentford enjoyed their 4^thconsecutive season in the Championship, securing a 9^thplaced finish which was their 4^thsuccessive top ten finish since their return to the league, a great achievement.

Having narrowly missed out on the play-offs but will be fairly happy with the continued progress and performances on the pitch considering the departure of key players over the last couple of seasons.

The only downside of an otherwise solid season was third round exits in both domestic cup competitions.

Off the pitch, Brentford are in fairly good shape, losses did rise from a measly £1.0m to from £3.9m as costs rose but despite this, Brentford are well within Financial Fair Play regulations at a time that many Championship clubs are on the brink of breaking them.

Looking to the future, Brentford have begun development for a new stadium that should boost finances in the long run. A peculiar arrangement for this development is in the works that will boost finances. However, may not be the best course of action as explained later.

Let’s delve into the numbers.

Revenue Analysis

Brentford saw their revenue remain stable, increasing slightly from £12.6m to £12.7m due to a similar season to last.

Matchday revenue fell from £3.5m to £3.1m (11%) despite average attendances increasing by 11% to 10,581. The ticketing mix changed slightly as season ticket sales fell from 5,840 to 5,828 which cannot explain the sizeable difference. The main reason was matchday revenue last year was boosted by their FA Cup Third Round match with Chelsea. Another reason is likely to be due to less takings on matchday in food and beverage sales as ticket prices remained flat.

Broadcasting revenue increased from £7.1m to £7.3m (3%) due to an increase in general distributions from the EFL and the fact Brentford finished 1 place higher in the Championship. In the domestic cups the changes in fortunes in the FA Cup (exiting one round earlier) and League Cup (exiting two rounds further) cancelled out to a large extent, although the marquee tie last year against Chelsea was financially missed.

Commercial revenue increased from £1.9m to £2.2m as another solid season as a top half Championship club paid dividends. Going forward, Brentford will want to exploit their close proximity to London to increase commercial income.

Other revenue was stable at £0.1m.

Looking ahead, revenue is likely to increase slightly despite a much poorer, mid-table campaign in the Championship this year. A fifth round FA Cup campaign should help bridge any shortfall in revenue from their fall in the Championship table. Matchday revenue should increase slightly after the additional FA Cup games, while commercial revenue should also increase slightly.

Costs Analysis

Brentford saw their costs rise despite revenue flatlining, hurting profitability as the costs of being competitive in the Championship continue to rise, causing many Championship clubs financial troubles.

Costs rose from £26.9m to £31.5m (17%) as Brentford strived for a play-off place.

Amortisation increased from £4.3m to £5.6m (30%) as Brentford reinvested some of the vast sums realised of late in the transfer market. Further investment is required if Brentford are to move back up the table.

Brentford saw a net interest expense of £0.2m turn into a net interest income of £0.5m this year due to an increase in the interest due to them from transfers. Brentford factored some receivables last year to receive money owed to them sooner than they were due, however this was not needed this year and the associated costs were not therefore present.

Brentford paid no tax after making a loss this year. The accumulated losses over the last few years will be useful should Brentford make a profit next year, as they can be used to reduce any tax bill faced.

Wages were on the rise, increasing from £14.7m to £17.2m (17%) as the general wage levels in the Championship rose. Brentford rewarded their key players with new contracts while new signings also attracted higher wages.

This wage increase works out at an extra £48k a week, which isn’t a great deal for an established Championship club.

Directors saw their remuneration increase from £0.2m to £0.3m (50%) as they were rewarded for another top half finish.

Looking ahead, costs are likely to increase by a similar amount to this year as wages continue to rise in the league. Further high profile departures may reduce this impact and keep costs at around £18m.

Transfers Analysis

Brentford were fairly busy in the transfer market this year, seeing 4 signings and 6 departures, with some key players unfortunately leaving Griffin Park.

In came Watkins (£1.8m), Maupay (£1.8m), Dalsgaard (£1.0m) and Mokotjo (£0.9m) for a combined £5.5m.

Departing were Jota (£5.9m), Colin (£2.9m), Vibe (£2.0m), Dean (£1.9m), Gogia (£0.7m) and Hofmann (£0.2m) for a combined £13.7m.

This led to a net transfer income of £8.2m, similar to the £8.4m income last year, the third year in a row of negative net transfer spends (four after this season) as Brentford continue to be a selling club.

Despite key players departing, the signings proved inspired with Watkins and Maupay proving a prolific partnership worth several times the fees paid now.

The departures earnt Brentford a profit on player sales of £14.1m, up 10% on last year as Brentford continue to benefit from great scouting and selling players at a premium.

Without these sales over the past 3 years, Brentford would have recorded large losses that would have surely bought about Financial Fair Play issues, explaining the number of departures. In order to not have to sell these players, Brentford need to work on improving their profitability, primarily by boosting revenue (matchday and commercial in particular), by reducing costs (not feasible) or by gaining promotion (the ideal scenario).

In cash terms, Brentford spent cash of £11.5m but received cash of £14.9m on transfers, a net cash inflow of £3.4m, much smaller than the net transfer income of £8.2m as many of the deals were negotiated with instalments.

This means Brentford are still owed £10.5m in transfer fees (£8.7m is due this year) while they only owe £2.7m (all due this year), a net debtor position of £7.8m, a good position to be in that will boost their cash balance next year and will assist their development and future transfers.

Brentford may also have to pay £3.5m in transfer fees should certain clauses be met based on their league performance and player appearances although it is unlikely this will all become payable.

After selling £31.5m of players this year, a big profit on player sales is expected that should see Brentford record a profit next year.

Debt Analysis

Brentford saw a similar debt profile to last year as their owners invested a bit more in the club.

Cash levels remained fairly low, falling from £1.3m to £1.1m (15%). The loss this year was funded by player sales that brought in £3.4m net, while new loans of £12.3m also allowed Brentford to spend £4.5m on club infrastructure as they look to develop for the long term.

Debt levels hence increased from £59.7m to £71.0m (19%) after these new loans, which took Matthew Benham’s investment in the club to £113.9m. Transfer sales this year were large and should mean further loans are not required in the short run and due to profit likely to be recorded next year from transfers, there is less pressure to sell key players.

Net debt hence increased from £58.4m to £69.9m (20%). Brentford are financially in decent shape with no Financial Fair Play issues surrounding the club at a time many clubs are sweating over their compliance. Player sales over the last few years have helped stabilise the club and have been reinvested well in the most part.

Brentford are primed to move forward and should hope to be a financially sustainable club in a couple years, with promotion then becoming a real possibility.

Brentford began preparing for a new stadium in 2018, looking to boost matchday revenue despite having a capacity utilisation of only 85% last year.

The stadium arrangement is a peculiar one, with Brentford entering a development agreement with a third party (not named) who the club will sell Griffin Park to and also the land for the new stadium. Griffin Park is to be sold for £30m while the new stadium is being sold to the developer for £52m. This will raise a huge sum of cash for Brentford and a brand spanking new ground which the club will then have to lease each year rather than own, reducing the initial cash needed significantly.

This will see Brentford record a massive profit on the sale of the stadium, meaning Brentford will probably record profits not only for themselves, but also for a Championship club next year.

The only issue here is obvious, they will not own their stadium. This may make expanding at a later date difficulty and will also mean they may have little power at a later date if the developer wishes to use the stadium for other uses (e.g. other sporting events etc.). Brentford would be wise to have a number of safeguards in place (which I’m sure they do). It will be interesting to see how this develops (no pun intended) going forward.

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April 27, 2019April 27, 2019

Derby County FC’s 2018 Finances – Pride Park Profits

Derby endured their 10^thsuccessive season in the Championship in 2018. Their decade long stay in the Championship nearly ended, failing to gain promotion in an agonising play-off semi-final defeat to Fulham. Derby have been going close to promotion in recent times and will be hoping they can get over the line soon.

All the club’s efforts were put towards promotion, leading to poor cup performances in 2018.

Off the pitch, Derby saw their losses fall to almost zero, dropping from £21.2m to £1.1m after taking the dramatic step of selling Pride Park to their owners and leasing their stadium back from their owners, a move that has come into plenty of criticism.

Let’s delve into the numbers.

Revenue Analysis

Derby saw revenue drop slightly, falling from £29.6m to £29.1m (2%) despite a successful season.

Matchday revenue increased from £8.9m to £9.3m (4%) despite average attendance falling from 29,042 to 27,175 (7%). This rise was because Derby benefitted from a bumper pay-out from their FA Cup tie with Manchester United.

Derby will hope to reduce this worrying trend of falling attendances, with the appointment of Lampard likely to help with this objective.

Broadcasting revenue rose from £7.9m to £8.3m (5%) on the back of an increase in the Premier League basic award to £200k plus Derby finished 3 places higher in the Championship.

Commercial revenue increased slightly from £9.8m to £9.9m (1%). Derby should look to capitalise on the increased interest in the club following the appointment of Chelsea legend Frank Lampard.

Other revenue fell from £3.0m to £1.6m (47%), the main reason for the fall in revenue, although what this relates to is not disclosed.

Looking ahead, revenue is likely to increase slightly after another solid season that may end in a play-off place, with the club currently sat in 6^thwith two games remaining.

Broadcasting revenue hence will be similar and matchday revenue is likely to remain stagnant. Commercial revenue may increase slightly after another solid season.

A return to the Premier League via the play-offs will also boost revenue slightly this year before increasing to astronomical levels the season after, with a £100m+ boost likely.

Costs Analysis

Derby saw their costs balloon despite stagnant revenue, hurting profitability considerably.

Costs rose from £52.4m to £75.8m (45%), a huge increase as they looked to gain promotion.

Amortisation rose from £5.1m to £6.6m (29%) as investment in the playing squad grew as the club showed ambition to return to the Premier League after a decade long absence.

Youth development expenditure grew from £4.0m to £4.6m (15%) as Derby continued to invest in their future in the hope unearthing their next big talent.

Interest costs fell to zero from £0.7m after a significant change in their debt profile (see debt analysis).

Derby paid no tax due to making a loss this year.

Wages rose from £40.5m to £46.8m (16%) after new signings signed on lucrative terms and existing key players were rewarded with new contracts.

This wage increase works out at an extra £121k a week, a sizeable increase for a Championship side with an already sizeable wage bill.

Directors saw their pay cut from £1.2m to £0.8m (33%).

Derby also pocketed £1.9m in compensation when they allowed Gary Rowett to join Stoke in the summer.

Looking ahead, Derby will see a further rise in costs with the marquee managerial appointment of Lampard and increased transfer activity last summer. Any increases in costs are likely to stretch Derby’s finances and further increase Financial Fair Play scrutiny.

Transfers Analysis

Derby were fairly busy in the transfer market with 5 signings and 4 departures during the season.

In came Lawrence (£5.0m), Wisdom (£2.1m), Huddlestone (£2.0m), Jerome (£1.5m) and Davies (£0.5m) for a combined £11.0m.

Departing Pride Park were Ince (£8.2m), Hughes (£8.2m), Christie (£2.5m) and Russell (£0.3m) for a combined £19.2m.

This led to a net transfer income of £8.2m, ending 3 consecutive seasons of net transfer spends.

The loss of key players in Ince, Hughes and Christie may have been the difference between promotion and their agonising play-off defeat. Despite this, the signings made all contributed to a good season, with Davies proving to be a great signing.

The player sold led to a profit on player sales of only £3.7m, with the sale of Hughes taken into account last year.

In cash terms, Derby spent cash of £19.5m and received cash of £22.3m, a net cash inflow of £2.8m, a small boost to their coffers.

This cash is likely to be needed to repay transfers soon with Derby owing other clubs £12.9m (£9.9m due this year) and the club only being owed £2.3m (none due this year). This £10.6m liability is likely to affect transfer plans going forward.

Derby could also potentially owe £19.2m should certain clauses be met in player contracts and transfer deals, although it is unlikely all of this will ever become payable.

Debt Analysis

Derby had an interesting year in terms of finances after taking the bold step to sell Pride Park to their owners for £81.1m.

Despite this sale, cash levels fell from £4.1m to £3.2m (22%), highlighting the depth of their financial issues.

A profit of £39.9m was realised on the sale, meaning a loss of over £40m would have been recorded without this sale which would have almost certainly seen the club break Financial Fair Play rules.

The sale was used to fund these losses and their increased costs and also allowed Derby to spend £3.4m on improving the club’s infrastructure.

As well as selling their stadium to their owners, debt levels fell from £143.7m to £54.0m (62%) in consideration for the sale of the stadium.

Morris also essentially waived some of this debt, capitalising it as equity so it will not be repayable in a bid to make their finances look better. Morris also lent a further £22.9m after these accounts were released to further boost finances.

Net debt hence fell from £139.6m to 50.8m (64%) as the sale and leaseback was entered into to try and calm Financial Fair Play concerns after their compliance was questioned by Middlesbrough’s owner.

Derby have looked to ease fans concerns by confirming there are multiple restrictions in the terms to protect the interest of the football club. It was deemed a necessary decision in the short term, with promotion the key to relieving these issues.

A return to the Premier League is vital to the future of the club with another few seasons in the Championship likely to see their finances unravel as their losses mount.

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April 12, 2019April 12, 2019

West Brom FC’s 2018 Finances – Red & Relegated

West Brom suffered relegation in 2018 after an 8 year stay in the Premier League following a rock-bottom finish in 2018. A turbulent season saw West Brom run through 4 managers (albeit one was just a caretaker for one game).

A poor season was capped off with early exits in both domestic competitions.

Relegation hurt West Brom off the pitch as well, with a profit of £32.3m swinging to a £5.9m loss.

Let’s delve into the numbers.

Revenue Analysis

West Brom inevitably saw a drop in revenue after a difficult season. Revenue fell from £137.9m to £124.8m (9%), although this is just the start.

Matchday revenue surprisingly rose from £6.8m to £7.4m (9%) as fans supported their team throughout their battle with relegation. Average attendances rose from 23,876 to 24,520 (3%), meaning West Brom were running at a stadium fullness of 92%.

Broadcasting revenue was the reason for the fall in revenue, dropping from £118.7m to £102.0m (14%) after West Brom plummeted 10 places in the Premier League.

Commercial revenue rose as West Brom enjoyed and exploited their final season of their Premier League Status. Commercial income increased from £12.4m to £15.4m (24%).

Looking ahead, relegation will see a huge drop in revenue as Championship prize money hits. This will be a huge shock to the system for West Brom who have now grown accustomed to Premier League TV money.

Parachute payments will soften the blow, but revenue will still fall by at least a third. Matchday revenue is likely to remain robust, while both broadcasting and commercial revenue will be hit hard.

Costs Analysis

West Brom saw a large rise in costs, increasing from £112.2m to £138.2m (23%). With revenue falling, this large increase in costs resulted in their profitability plummeting.

Amortisation rose from £17.1m to £25.4m (49%) after heavy investment which obviously didn’t work but showed their desire to remain in the Premier League.

West Brom had no interest costs due to a lack of debt In the club (see debt analysis).

There was also no tax due to their loss making status, this is likely to persist into the near future.

Wages rose from £79.0 to £92.2m (17%) after an influx of new signings in the summer, while there was probably sizeable severance pay paid in the year, although no amounts have been disclosed.

These extra wages worked out at a sizeable extra £254k a week, an amount that will need to be completely reversed in the Championship.

Director remuneration of £90k has been disclosed, halve of the £180k paid last year as directors were penalised for relegation. This amount seems relatively low, so there is likely to be additional directors whose pay was not disclosed.

Looking ahead, Relegation will mean it is now vital West Brom reduce costs. Relegation wage drops will come into effect, reducing wages significantly while high-earners have departed. Amortisation is likely to fall after a negative net transfer spend in 2018/19.

General costs will fall due to the lower standards required in the Championship however this will not be huge.

Revenue is likely to fall by a greater extent than costs, meaning profitability will drop even further and losses will grow.

Transfers Analysis

West Brom had a busy transfer window in an attempt to remain in the Premier League with 8 signings and a couple of departures at the Hawthorns.

In came Burke (£13.7m), Rodriguez (£12.3m), Gibbs (£6.8m), Zhang (£6.5m), Hegazi (£4.5m), Sturridge (Loan – £2.1m), Barry (£1.0m) and Gabr (Loan – £0.5m) for a combined £48.2m.

Out went Gardener (£1.6m) and Zhang (Loan £0.3m) for a combined £1.9m.

This saw a huge increase in their net transfer spend from £9.8m to £46.3m (372%), showing their ambition to remain in the Premier League.

However, the signings proved to be poor. Burke never settled and Zhang only lasted half a season. Gibbs and Rodriguez are good players, but injuries halted their progress. Barry proved a level headed presence while Hegazi was a hit signing initially before tapering off.

West Brom recorded a profit on player sales of £5.8m, an amount that does include the sale of Evans on top of the sale of Gardener.

In cash terms, West Brom paid transfer fees of £41.7m and only recouped £6.0m in the year, a net cash outlay of a hefty £35.7m.

West Brom are also owed a further £15.2m in transfer fees (£5.1m due this year), however they owe clubs a chunkier £27.6m (£17.0m due this year), a net £12.4m creditor position.

This may affect future transfer plans for the club should they not bounce straight back to the Premier League.

West Brom also have contingent transfer fees of £8.7m which are payable if certain clauses are met, although it is unlikely all these fees will ever become payable.

Debt Analysis

This is going to be a pretty short section.

Cash reserves plummeted from a healthy £39.5m to £9.2m (72%) after significant transfer spending in the year and the small loss incurred this year.

On top of this, West Brom also spent £1.7m on improving club infrastructure.

West Brom have no debt, being completely funded by their success and misfortunes on the pitch.

Hence, West Brom saw a huge dip in their net cash position from £39.5m to £9.2m (72%).

West Brom are in a good place financially to bounce back to the Premier League, being a model Premier League club throughout their stay. It does however show that a few bad decisions can unravel even the most sensible of clubs with a poor strategy and signings causing their demise.

Their finances provide a great foundation to return sooner rather than later with no need to go for broke to return, making the decision to sack Moore even more perplexing, although it may be a function of their owner being unwilling to provide the funding a prolonged Championship stay would require.

West Brom are however in need of investment and a solid long term strategy to return to the Premier League and stay there.

Should promotion not be achieved in the next couple of years, growing losses would cause Financial Fair Play issues which would constrain their ability to compete and increasingly make a return more difficult.

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April 7, 2019April 7, 2019

Leeds United’s 2018 Finances – New Era

Leeds had a disappointing season in the first year since Radrizzani took over at Elland Road, finishing 13^thin the Championship, condemning the club to a 9^thsuccessive season away from the Premier League.

There was also disappointment in the domestic cups after early exits in both the FA Cup and League Cup.

However, optimism has been renewed due to their new ownership and the ambition he has shown to date, increasing investment in the club with much more expected to follow.

The investments made did worsen their finances, turning a profit of £1.0m to a loss of £4.3m, however with promotion in touching distance, it looks like a gamble that will pay off.

Let’s delve into the numbers.

Revenue Analysis

Leeds reached record levels of revenue in 2018, with revenue rising from £34.2m to £40.8m (19%).

Matchday revenue continued its upward trajectory, rising from £14.1m to £16.5m (17%) as an increase in fan sentiment saw attendances rise yet again from 27,699 to 31,521 (14%), approaching full capacity (37,980) as fans our hopeful once again of success.

It was also their second highest average attendance in their 8 year stay in the EFL.

Broadcasting revenue was relatively stable, increasing slightly from £7.6m to £7.7m (1%) despite falling 6 places in the Championship and a worse performance in the cups.

This is due to the club featuring on TV more regularly given the increased interest in the club.

Commercial revenue rose by a third, increasing from £12.5m to £16.6m (33%) as their new owner opened the doors to new, lucrative deals. This was a great season commercially as their popularity among their fans grew and in England as a whole as they close in on a Premier League return.

Looking ahead, revenue will rise after a wonderful league campaign so far. This should see revenue rise as prize money will increase and they have featured frequently on Sky Sports.

Attendance looks likely to rise again with average attendance to date of around 33,000, so matchday revenue will also rise.

Commercial revenue should continue to increase due to the growing popularity and the aggressive commercial strategy the club have begun to implement.

Promotion will not initially boost revenue considerably, instead, should they get over the line, revenue will boom to over £100m following their first Premier League campaign.

Costs Analysis

Leeds saw a significant increase in costs, with operating expenses rising from £43.3m to £61.4m (42%) after a surge in investment.

Amortisation grew from £5.4m to £8.1m (50%) after an increase in player investment after their net transfer spend grew by nearly 1,000% (see transfer analysis)!

The rise in amortisation signifies Leeds growing ambition and it is expected this will only rise going forward.

Lease costs remained relatively stable, rising from £2.1m to £2.2m (5%).

Interest costs rose from £1.5m to £1.7m (13%) due to an increase in lease interest costs.

Leeds also had £2.6m of interest income last year due to a change in the value of their loans which wasn’t present this year, contributing to their loss.

Leeds paid no tax this year due to making a loss, this may help when they return to a profit in the next couple of years, with the loss in 2018 being able to partly offset any tax bill the club face.

Leeds saw a huge rise in their wage bill as it increased from £20.7m to £31.4m (52%). The club signed a host of players with some new high earners, while new contracts were given to key players.

Should Leeds achieve promotion is has been disclosed they will owe players and staff £18.1m in bonuses, a sizeable sum that will increase their losses. However, from a Financial Fair Play perspective, these amounts will be ignored in any investigation (although Leeds are well within the limits so we wouldn’t expect an investigation by the EFL at present).

The extra wages equalled a sizeable extra £206k a week, a large sum for any Championship club.

Directors were paid £212k this year, however no such disclosure on remuneration were made last year.

Looking ahead, costs are likely to rise significantly after another year of spending that will see amortisation and wages rise. The extra promotion bonuses will also increase costs significantly, should they reach the promised land.

Transfers Analysis

What a busy transfer for Leeds! A remarkable 14 players entered Elland Road while only 2 departed.

In came (here we go) Forshaw (£4.6m), Jansson (£3.6m), Saiz (£3.2m), Roberts (£2.6m), Alioski (£2.3m), Klich (£1.5m), Sacko (£1.5m), De Bock (£1.5m), Grot (£1.4m), Cibicki (£1.4m), Ekuban (£0.5m), Ideguchi (£0.5m), Halme (£0.5m) and Wiedwald (£0.5m) for a combined £25.6m.

Out went Wood (£14.8m) and Bridcutt (£1.0m) for a combined £15.8m.

This meant their net transfer spend increased from £0.9m to £9.8m (989%), a meteoric rise in spending and a show of ambition.

However, the signings were quantity over quality with the players proving to be an incredibly mixed bag. The likes of Forshaw, Jansson and Saiz have been great while other have flattered to deceive but there is still time for them to come good.

Leeds may have been better off not spreading their £25m so thinly and focussing on signing a few great players.

The departure of Wood was clearly felt as they missed his ability towards the back end of the season.

Leeds recorded a profit on player sales of £18.1m (although this does also include the sale of Viera at the end of the season) largely due to the sale of Wood. This figure helped make sure their losses weren’t far greater.

The lack of sales this year (also considering the sale of Viera has already been taken into account), Leeds losses are likely to be much greater this season.

In cash terms, Leeds spent cash of £19.5m while receiving cash of £16.9m, a net cash outlay of £2.6m, which is a fairly minor outlay considering the ambitions of their new owners.

Leeds are also owed a further £11.5 in transfer fees (£5.9m due this year) and owe £12.4m (£5.7m due this year), a net owing position of a measly £0.7m which is hardly going to affect future transfer plans.

There is also the potential for Leeds to owe other clubs and agents £7.1m in contingent transfer fees should certain transfer clauses be met (largely related to promotion and appearances), although it is unlikely the full amount here will ever become payable.

Debt Analysis

Leeds saw their cash levels depleted following their losses, with cash reserves falling from £4.0m to £2.9m (28%).

Their new owners provided new funds of £13.6m (£11m in shares and £2.6m in loans). These funds were used to take care of their losses and pay transfer fees. It also allowed them to invest £3.3m in the club’s infrastructure as they look to also invest in their future as well as present.

The £11m provided by Radrizzani in shares was also used to repay existing loans in the club.

Debt levels surprisingly fell, falling from £24.6m to £19.9m (19%) as Radrizzani repaid debts owed to their old owners of around £11m and replaced these with shares of £11.0m, meaning that Leeds now owe their owners less money.

On a separate note, Leeds disclosed they are seeking legal advice on the recoverability of a £2.0m debtor, it was not disclosed what this amount relates to, but they will be hoping to recover this amount.

Net debt hence dropped from £20.6m to £17.0m (17%). There is no doubt this amount is likely to increase as Radrizzani begins pumping more money into the club. Promotion (if achieved) is likely to require significant investment (i.e. Wolves and Fulham) however it is how this is spent that will be important.

No matter how this season ends, promotion is vital in the next season or two to make any of these investments worth it. Also, if promotion is not achieved soon, Financial Fair Play limits will be tested, and the club may be forced to tone down investment and implement strict costs controls to avoid penalties.

Leeds are finally close to a return to the big time and will be hoping this season is the one. Financially they are in a good place and a return to the Premier League this season will only boost their finances in this new era.

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