League One Archives - FINANCIAL FOOTBALL NEWS

April 13, 2019April 13, 2019

Charlton Athletic FC’s 2018 Finances – Play-Off Pains

Charlton suffered another agonising season after once again losing in the play-offs, Condemning the Addicks to a third successive season in League One.

They will be hoping that they can achieve promotion at the third time of asking and return to the Championship, with the club close to another play-off place.

A profit of £1.2m was recorded last year due to player sales, their relegation last year and a lack of player sales has led to this turning into a loss of £10.1m in 2018.

Let’s delve into the numbers.

Revenue Analysis

Charlton saw revenue fall from £7.6m to £7.3m (4%).

Matchday revenue increased in 2018, rising from £3.2m to £3.4m (6%) as another solid campaign in League One saw attendances rise from 11,162 to 11,846 (6%).

Broadcasting revenue decreased once again, falling from £1.8m to £1.5m (17%) despite finishing in the same position as last season due EFL parachute payments following relegation falling which was capped with poor domestic cup performances.

Commercial revenue increased from £1.2m to £1.3m (8%) as their YouTube venture began to pay dividends after hosting events at The Valley.

Other revenue fell from £1.4m to £1.1m (21%).

Looking ahead, Charlton are likely to see a similar level of revenue with the play-offs beckoning again for the South London side. Promotion is likely to see a slight boost this year (and a huge boost the following season). Commercial revenue should grow again slightly, while matchday revenue may also increase slightly. Broadcasting revenue is likely to remain relatively stable.

Costs Analysis

Charlton saw a small dip in costs, falling from £21.9m to £20.7m (5%). This fall was in line with the fall in revenue (4%), improving profitability slightly despite the sizeable loss (which was due to the lack of transfers).

Amortisation fell from £1.9m to £1.7m (11%) after a lack of player investment this season after signings players on free transfers only.

Lease costs on facilities fell from £159k to £138k (13%).

Interest costs increased from £0.7m to £0.8m (14%) after an increase in loans from their owners (see debt analysis).

Charlton paid no tax after making a loss in the 2017/18 season which is usually the case for Charlton at the moment.

Wages rose fell from £11.1m to £10.2m (8%) as players left The Valley and Charlton had to cut costs after another season in League One.

The salary saving works out at measly £17k a week in wages, which is still a decent saving for a League one side.

No director remuneration was disclosed, with it being in the wage figure above.

Looking ahead, Charlton are likely to see a similar level of costs next year, although wages may cause costs to rise should they gain promotion as bonuses will be rewarded. Another season in League One however would require costs to be cut further to avoid larger losses and Financial Fair Play issues.

Transfers Analysis

Charlton had a quiet transfer season with the club constrained on spending due to their League One status.

The Addicks made no signings other than free transfers while they had one departure, with Holmes leaving for £0.4m.

This led to a negative net transfer spend of £0.4m, the third year in a row this has happened.

Charlton recorded a profit on player sales of £4.0m after receiving contingent transfer fees from the prior sales of the likes of Gomez, Lookman and Gudmundsson who all met appearance bonuses that increased Charlton’s income.

The profit also includes the sale of Konsa, which happened at the end of the season but before the end of June.

In 2017, Charlton recorded a profit on player sales of £16.2m after the sale of Lookman, an amount that was the sole reason for their profit last year, the lack of sales in 2018 hence so losses grow considerably.

Charlton benefit significantly from their academy and did well to negotiate contingent fees that can give the club a timely boost as they look to return to the Championship.

However, Charlton do owe other clubs £1.5m for transfers (all due this year) and are only owed £0.8m, a net creditor position of £0.7m which is affecting their ability to buy any players currently with finances tight.

Charlton could also be owed a further £7.7m in transfer fees if certain conditions are met, and with the likes of Gomez and Lookman beginning to make names for themselves, these fees are likely to be received at some point, although the sooner the better.

In comparison, Charlton could owe other clubs £1.9m in contingent transfer fees should certain conditions be met, although this is less likely to become payable than the figure above.

Debt Analysis

Charlton saw cash levels drop significantly, falling from £2.1m to £0.4m (81%) after the huge loss made.

There was also a sizeable £2.2m spend on training facilities at Sparrows Lane, showing a commitment to continue to grow despite their hardship of late.

This is vital for a club that prides itself on its ability to bring through youth, who will see this development as another reason to begin their young careers at The Valley.

To fund all of this, debt levels rose from £65.0m to £69.6m (7%) as the owners plunged more money into the club to keep them ticking over and hopefully aid their promotion push.

The loans from owners of £61.9m carry an interest rate of 2% while their director loans of £8.0m are interest free.

Net Debt hence increased from £62.8m to £69.2m (10%).

Charlton are likely to require further irrespective of whether promotion is achieved. If they are promoted, investment will be needed to bring them up to standard and stay in the division, while if promotion is not gained, further funding will be required to keep their finances in a decent position.

The prolonged stay is affecting their finances considerably and will make it increasingly difficult to return to the Championship due to a deterioration in their finances.

A Championship return soon is vital for the long term financial health of the club with Charlton not being a club built to survive in League One. A return to the Championship will allow them to better benefit commercially from their London status and grow financially.

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March 25, 2019March 25, 2019

Wigan Athletic’s 2018 Finances – Wigan’s Woes

Wigan secured an immediate bounce back to the Championship following an unexpected relegation last year by winning League One.

Promotion was the minimum expectation and Wigan met this challenge successfully to avoid financial ruin.

An FA Cup Quarter Final run was a further highlight to a good season that gave fans renewed optimism going into 2019.

Relegation was however costly for Wigan, increasing their losses from a measly £1.6m to an eye-watering £27.6m (1,000%!).

Let’s delve into the numbers.

Revenue Analysis

Wigan saw a huge drop in revenue as it fell from £27.2m to £9.3m (66%).

Matchday revenue dropped from £3.0m to £2.1m (30%) as Wigan suffered from lower attendances at games and also from cheaper tickets. This is despite having more home games as their FA Cup campaign yielded 6 home ties.

Broadcasting revenue fell off a cliff, free-falling from £20.2m to only £3.1m (85%). This drop was more pronounced then the majority of relegations from League One to Championship due to the fact that Wigan were receiving their final parachute payment during the 2016/17 season.

This meant that not only did broadcasting revenue from the Championship drop to League one levels, they also lost the buffer that their former Premier League status gave, talk about poor timing!

Even a solid FA Cup run couldn’t save their broadcasting income.

Commercial revenue surprisingly remained robust, even increasing slightly from £3.3m to £3.4m (3%) despite the loss of their Championship status. Their immediate return means that they are unlikely to see any drop in commercial revenue and now have a platform to build from.

Other revenue remained stable at £0.7m.

Looking ahead, Wigan can expect to see a rise in revenue which should at least double to around £7m due to promotion back to the Championship and could well approach £9-10m. Matchday revenue should return to around £3m while commercial revenue has potential to grow.

Revenue will still be substantially below their 2017 revenue due to no more parachute payments as mentioned above.

Costs Analysis

Wigan saw their costs thankfully decrease last year, falling from £33.9m to £28.9m (15%). This was still a much lower fall than the fall in revenue, hurting profitability hugely. Crazily, revenue is less than 3 times the size of their costs, an unsustainable position to be in for any business for any prolonged period of time.

Amortisation was almost halved in the year, decreasing from £4.4m to £2.4m (45%) as investment in the playing squad fell significantly following relegation which was a necessity.

Interestingly, Wigan disclosed their agent fees which fell from £0.9m to £0.5m (44%), a figure which still seems high considering Wigan spent only £0.6m in transfer fees and received £1.0m.

A huge part of Wigan’s costs and hence loss was due to an accounting impairment on the goodwill in the club that was created when they were brought. Wigan being relegated obviously saw their value plummet and hence the goodwill was devalued due to this (technical accounting sits behind this explanation). The good thing however is that due to the nature of this cost (being just an accounting costs and not a real one), it will not be taken into account in any Financial Fair Play investigation.

Wigan saw wages fall from £18.1m to £13.6m (25%) as relegation wage drops came into effect and some high-earners and fringe players left as Wigan attempted to create some sort of wage control to brace for their season in League One.

The wage drop was equivalent to a saving of £87k per week, a sizeable amount for a club the size of Wigan.

Wigan also had interest on new loans of £1.0m in the year, having previously had loans that were interest-free.

Wigan also paid no tax due to their loss in the year.

Looking ahead, Wigan can expect a fall in costs due to the unlikelihood of another sizeable impairment of goodwill. Wages are likely to increase slightly however not substantially as Wigan look to be more prudent following promotion.

Transfers Analysis

It was a quiet transfer season for Wigan, with two signings and two departures for low transfer fees.

In came Walker (£0.3m) and Vaughan (£0.3m) for a combined £0.6m.

Out went Bogle (£0.7m) and Woolery (£0.3m) for a combined £1.0m.

This led to a small net income of £0.4m, the 6^thconsecutive year of having net transfer income as the club are forced to budget and partly rely on transfer income to stay afloat.

The new signings were important in securing the league title and the departures were not particularly missed despite their quality.

Wigan also recorded a profit on player sales of £1.0m, which is almost all the fees received in the year despite Bogle being purchased the year before for £0.8m. It is likely that the fees on transfermarkt.com are slightly wrong.

In cash terms, Wigan spent cash of £2.8m and received a mini windfall of £5.9m, a net cash income of £3.1m as they received a large amount from previous transfers (most likely Wildschut) which helped the club following the loss this year.

Wigan are also owed a further £0.5m (all due this year) and owe £0.3m (all due this year), meaning they are net due £0.2m which isn’t much and shouldn’t help or hinder any future transfer plans.

There are potential contingent transfer fees payable of £3.6m should certain transfer clauses be met, although it is unlikely a large part of this is ever paid.

Debt Analysis

Wigan needed all the cash they could get their hands-on meaning cash reserves halved from an already low £1.0m to £0.5m (50%). Wigan used cash received from transfers (£3.1m) and new loans (£2.3m) to subsidise their costly relegation.

Relegation also threatened investment in club facilities, as investment fell to £0.3m from £0.6m (50%) as club improvements became low priority in the face of poor finances.

Debt increased due to the new loans mentioned above, increasing from £12.3m to £14.8m (20%). Wigan received new bank loans of £1.7m and also new owner loans of £0.9m, while a small amount was repaid to Whelan before the sale of the club.

Following a sale of Wigan to International Entertainment Corporation (IEC) by Whelan, Whelan is to be repaid all of his loans by IEC which are approximately £11m.

It remains to be seen whether IEC will include this £11m or so as an amount owed to them by Wigan or if they are just going to pay it off as part of the acquisition consideration.

Wigan hence saw net debt increase from £11.3m to £14.3m (27%). Wigan seem financially secure following their sale by Whelan who could no longer cope with the pressures, both financially and sporting.

It now remains to be seen what the level of ambition is of IEC and their plans for Wigan who are in need of investment in their playing squad should they harbour ambitions of remaining a Championship club, let alone returning to the Premier League.

Wigan’s return to the Championship should enable their finances to begin improving although we expect them to remain loss-making for the time being until a return to the Premier League is secured, costs are cut significantly, or a big player is sold.

Lastly, from an FFP standpoint, Wigan should be okay due to the nature of some of their costs which is likely to be excluded when examining whether any rules have been broken.

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March 2, 2019March 2, 2019

Barnsley 2018 Finances – Relegated but Ready

2018 was a difficult year for Barnsley as they battled bravely against relegation to no avail. The mid-season departure of Paul Heckingbottom to Leeds was a huge blow and didn’t help their battle for survival in the Championship as the club fell to a 22^ndplaced finish.

Off the pitch, their long-time owners, the Cryne family, sold 80% of the club to international investors. Shortly following this, Patrick Cryne passed away, may he rest in peace following his services to the club. His son, James Cryne, continues to hold the 20% stake in Barnsley.

Barnsley did return to a loss-making position last year however, the fall in player sales being the main reason. Barnsley recorded a loss of a measly £0.2m (essentially breaking even), after recording a £12.8m profit last year (of which £13.6m related to player sales).

Let’s delve into the numbers.

Revenue Analysis

Barnsley’s second successive season in the Championship brought with it an increase in revenue. Revenue rose from £12.5m to £14.0m (12%).

Matchday revenue fell slightly from £3.7m to £3.6m (3%) as attendance fell slightly as relegation loomed. Barnsley will be hoping a more successful season in League One will see matchday revenue rise.

Broadcasting revenue increased despite relegation, rising from £7.2m to £8.2m (14%) as the club benefitted from an increase in distributions from the EFL. Broadcasting revenue will experience a large fall after relegation as the prize money available in League One is much lower than that available in the Championship.

Commercial revenue increased from £1.1m to £1.2m (9%) despite relegation as Barnsley managed to attract new sponsors. Barnsley will be hoping they can retain these sponsors despite relegation as they plot an immediate return to the Championship.

Other revenue doubled from £0.5m to £1.0m (100%).

Looking ahead, Barnsley will see an inevitable drop in revenue as broadcasting revenue plummets following relegation. The magnitude of the fall will depend on whether they can bounce back immediately and also whether they can increase matchday or commercial revenue which is a possibility but will be difficult.

Costs Analysis

Barnsley saw a rise in costs as they attempted to avoid relegation. Costs rose from £12.1m to £15.4m (27%), a rise that is significantly more than the 12% growth in revenue, hence Barnsley’s profitability took a hit.

Amortisation doubled from £1.1m to £2.2m (100%) as the club invested more heavily than usual in their playing squad as they looked to push on last season following survival in the previous campaign. This unfortunately didn’t materialise.

Lease charges on facilities remained stable at £150k.

Interest charges rose 54% from £100k to £154k.

Barnsley’s wages increased significantly from £8.6m to £10.6m (23%) as the club invested in their players and attracted new players at higher earnings. This rise would have been larger had it not been for relegation and the relegation wage drop clauses that brings.

This wage rise is the equivalent of an extra £38k per week, a lot for a club the size of Barnsley.

Directors also saw their wages rise significantly, increasing from £131k to £185k (41%) despite relegation, maybe a sign of good will to the directors staying following a change in ownership.

Looking ahead, costs are likely to fall as the club reacclimatise to life in League One. Relegation wage drop clauses will come into full effect. However, Barnsley did not sell many players this season in the hope of an immediate return to the Championship so wages and costs in general may not fall that much. If this is the case, Barnsley may experience a big financial loss this year.

Transfer Analysis

Barnsley had a very active transfer season last year as they attempted to kick on in the Championship with a raft of new players.

In came McGeehan (£1.0m), Thiam (£1.0m), Moore (£0.8m), Potts (£0.8m), Pinnock (£0.5m), Pearson (£0.5m), Knasmullner (£0.5m), Lindsay (£0.4m), Mallan (£0.3m), McCarthy (£0.2m) for a combined £5.8m.

Exiting Barnsley were Roberts (£3.6m) and MacDonald (£0.7m) for a combined £4.3m.

This led to a net spend of £1.5m, a huge change from last season’s negative net spend of £9.8m.

Despite staying up last year, the exits of key players Bree, Mawson and Hourihane have come back to bite Barnsley and the investments made were not enough to combat this and survive.

Barnsley recorded a profit on player sales of £3.8m in the year on the back of the two player sales, down from £13.6m.

Interestingly, Barnsley spent cash of £5.2m in the year on transfer fees but only received £10k cash after apparently negotiating terrible payment terms on the sale of Roberts and MacDonald.

Even more interesting is that their accounts say they are only owed £2.6m in transfer fees so the rest of the fees must be contingent based. In contrast, Barnsley owe clubs £1.3m in transfer fees, all of which is due this year.

Barnsley may owe a further £3.3m based on contingent transfer fees that will become payable should certain transfer clauses be met.

Debt Analysis

Barnsley have historically been a well-run club financially with low levels of debt and this continued and even improved this season.

Cash levels fell slightly from £5.7m to £5.6m (2%) as the club reinvested the majority of the cash received from last season’s transfers on new players and higher costs.

Barnsley are now also remarkably debt free! Their owners converted their loans into share capital to eliminate their debt completely and will now only benefit from the club being successful when they choose to sell. The debt was converted as part of the acquisition of the club and means they are now self-sufficient.

This led to the club moving into a net cash position of £5.6m which is fantastic news for the club.

Now it will be interesting to see where the club goes from here. Promotion is very much on the cards so the fans will be hoping that their new owners invest more cash into the club or makes use of their cash reserves of £5.6m, although this amount may be needed to combat the fall in revenue Barnsley will experience on the back of last year’s relegation.

It is also worth noting that Barnsley are well within the Financial Fair Play rules and should have no problem meeting its requirements for the foreseeable future.

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February 27, 2019February 27, 2019

Rotherham 2018 Financial Review – ASD Light The Way

Rotherham were relegated from the Championship in 2017 but secured an immediate return via the play-offs with the hope of a longer stay this time around.

Promotion was much needed as the club experienced a sizeable drop in revenue, however due to good financial management the club managed to cut costs and also reduce the loss experienced in the Championship, with Rotherham making a loss of a measly £0.5m this year, down from £1.2m the previous season.

Let’s delve into the numbers.

Revenue Analysis

Relegation to League One saw revenue drop from £13.0m to £9.9m (24%) with the major reason being a drop-in prize money.

Matchday revenue stayed relatively stable however it did fall for the second successive season. Matchday income fell from £2.3m to £2.2m (4%) on the back of their fall back to League One. Rotherham will be hoping this increases slightly upon promotion.

Broadcasting revenue took a massive hit, more than halving from £7.0m to £2.2m (69%) as the club suffered from the effects of relegation. Their immediate return should see broadcasting revenue recover to these levels again fortunately.

Commercial revenue surprisingly increased, rising from £3.6m to £5.4m (50%) as their new flagship sponsor, ASD Lighting plc (who are a business of their owners) remained a sponsor of their stadium despite relegation, and much to the delight of the commercial team who did a great job of convincing their other key partners AESSEAL and Mears to remain as they plotted an immediate return to the Championship. Rotherham will look to enhance these relationships on their return to the Championship and build on this with new, lucrative deals.

The nature of their relationship with ASD means that they may be deemed to have artificially inflated their commercial revenue figure, this may have Financial Fair Play (FFP) implications if losses increase in future that push them close to the FFP thresholds. This isn’t a major concern currently as their finances (even without boosted commercial revenue) are well under control.

Other revenue remained at around £100k.

Looking ahead, promotion will see a sizeable rise in revenue for Rotherham. Matchday revenue and commercial revenue should see small rises while broadcasting revenue will more than triple to in excess of the £7m received in 2017.

Costs Analysis

Rotherham did a good job of cutting costs following relegation in order to not let their finances spiral. Costs fell from £14.2m to £11.3m (20%) as the prudent club managed to reduce costs relatively in line with revenue, meaning profitability was not greatly affected.

Amortisation remained relatively stable at £0.5m as the club reduced investment slightly due to relegation. The club have relatively low levels of amortisation having historically not spent a great deal in the transfer market.

The club also saw a reduction in lease costs, which fell from £1.2m to £1.0m (17%). The leases are from R U Estates Limited which is owned by their owners, hence the slight fall.

Rotherham paid no taxes due to their loss-making status and had no finance costs.

Wages were the big fallers as Rotherham cut wages from £8.7m to £6.3m (28%) on the back of relegation as relegation wage drop clauses came into effect and high-earners departed the club.

The wage drop is the equivalent of a reduction of a modest £46k a week, but a sizeable reduction for Rotherham.

Directors of Rotherham saw their pay increase from £350k to £469k (34%) despite relegation. These directors were also paid by ASD Lighting and hence did not affect the finances of Rotherham a great deal.

Transfer Analysis

Rotherham had a busy summer in the transfer market, however the majority of deals were on free transfers with one player joining and one departing for transfer fees.

In came Jamie Procter for around £0.1m and out went Danny Ward for £1.6m, giving Rotherham a net transfer income for £1.5m after a net spend of £1.3m last year.

Rotherham did well in the transfer market on a shoestring budget by achieving promotion and will be hoping they can repeat the trick this year after not spending a dime in the Championship.

The club managed to record an accounting profit on the sale of Danny Ward of £0.8m after his two and half year stay in Rotherham.

Rotherham had to spend cash of £0.3m of cash for transfers due to instalments due on previous signings. However, they received £0.8m from clubs (most likely Cardiff) for transfers.

The Millers are also owed a further £949k in transfer fees which will be well received as they also owe a further £859k themselves. This shouldn’t be a concern due to the amounts involved and that they are still, on a net basis, owed £90k.

There are minimal contingent transfer fees (£36k) within the club.

Debt Analysis

Rotherham have always been a financial well-run club, built for sustainability. This has meant debt levels are low, however with most clubs at their level, all the cash reserves are needed to compete.

The Millers ended the year with minimal cash (in their overdraft by £41k), down from £0.3m last year. The slight fall was mainly down to another year of losses and the £0.3m paid in transfer fees.

Debt levels fell from £3.9m to £3.6m (8%) as some debt was paid down to their owners.

This meant net debt remained stable at £3.6m as the two effects cancelled each other out.

There is not much to report on Rotherham’s debt levels as the club is financially stable and should be for the foreseeable future unless their owners lose interest in the club which seems unlikely. Despite their financially stability it is worth noting their finances are dependant on their owner’s company ASD lighting who plunge money into the club through commercial revenue and also charge the club leasing costs which may or may not be on commercial terms (although it is stated they are). Should this relationship change in anyway, it may have a significant effect on their finances.

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