Norwich had a wonderful 2019, gaining promotion back to the Premier League after three years in the Championship. Norwich won the league unexpectedly after a poor season in 2018 and the sale of key players Maddison and Murphy.
It was clear this year all focus was on promotion leading to early exits in both domestic cup competitions.
Off the pitch, Norwich recorded one of their largest losses ever, and certainly the largest in recent history with the initial costs of promotion (plus the end of their parachute payments) led to a loss of £33m in 2019. This is only a short term issue with the club due to receive an influx of revenue after returning to the Premier League.
Let’s delve into the numbers.
Revenue Analysis
Norwich saw a huge drop-off in revenue following the end of their parachute payments relating to their relegation from the Premier League in 2015/16. Total revenue fell from £62m to £34m (45%).
Matchday Revenue
Matchday revenue remained stable at £10m in 2019 with average attendance increasing slightly from 25,960 to 26,017.
Matchday revenue should increase following promotion with matchday revenue rising to £12m in their last Premier League campaign owing to higher ticket prices. Carrow Road is maximum capacity of 27,244 means that matchday revenue is restricted by this factor and can only really increase by increasing ticket pricing.
Broadcast Revenue
Norwich saw broadcast revenue plummet from £40m to only £11m (73%) after their parachute payments ended, meaning their return to the Premier League is very timely!
With no cup runs to supplement the lack of parachute payments, broadcast revenue fell off a cliff and this would have been their new normal revenue level had they not gained promotion in 2019.
Broadcast revenue will increase nearly ten fold this year following promotion. Huddersfield, who finished bottom of the Premier League in 2018/19 received £97m, while every other club received over £100m.
Commercial Revenue
Norwich saw a slight bump in commercial revenue from £12m to £13m (8%) with the club yet to see any real effects from their promotion, which will be apparent in due course.
Norwich will be hoping to effectively exploit their new Premier League status better than the last time they were in the Premier League as commercial revenue only reached £14m, a figure they will be aiming to significantly improve upon in 2019/20.
Other Revenue
Other revenue fell from £0.7m to £0.5m.
What does the future hold?
Norwich are going to see a huge uplift in total revenue in 2019/20. The riches on offer in the Premier League will see broadcast revenue jump from £11m to over £100m, even if the club is relegated and finish bottom.
Matchday revenue and commercial revenue will also increase, depending largely on ticket pricing and commercial effectiveness respectively.
It would be a surprise if Norwich didn’t see an increase of over £100m in their total revenue next year.
Expenses Analysis
Norwich obviously knew their revenue was due to drop significantly and aimed to reduce their costs to match. This wasn’t possible as costs only fell from £93m to £76m (18%), significantly reducing their profitability as they recorded one of their biggest ever losses.
Amortisation
Amortisation more than halved form £24m to £10m (58%) after another year of falling playing squad investment following their relegation from the Premier League in 2016.
The expensive players brought during the 2015/16 season were largely cleared amount meaning amortisation charges began to fall away after they were replaced with much cheaper players.
Net Interest Expense
Norwich saw their net interest expense increase from £0.5m to £1.5m (200%), owing to a new bank overdraft facility and loans that were needed following their fall in revenue.
Wages
Norwich’s wage bill remained stable at £54m. This is because of promotion bonuses that were paid at the end of the season that significantly increased their wages and one of the main reason behind their large losses, showing the short term costs of promotion.
Without these bonuses, wages would likely have fallen significantly and in line with the fall in revenue after the sales and release of high earners.
The only director on the payroll saw their salary more than quadruple from £108k to £480k following promotion.
What does the future hold?
Norwich are likely to see a rise in costs following promotion. However, any rise is likely to be minimal compared to the other two promoted clubs with Norwich being incredibly frugal with their finances, spending only a small amount on new signings. With promotion bonuses falling away next year, the wages of the new signings is likely to only see a small rise in wages (if any).
Therefore, Norwich are likely to record one of the largest ever profits of a promoted side next year after running in such a financially secure manner, which can only be commended.
Transfers Analysis
Norwich had a busy 2018/19 in the transfer windows, largely utilising the free transfer market to replace key players, something they did with remarkable success.
In came Marshall (£1.5m), Buendia (£1.4m), Leitner (£1.4m), Passlack (Loan – £0.5m) and Heise (£0.2m) for a combined £4.9m.
Out went Maddisson (£22.5m), Murphy (£10.3m), Watkins (£1m) and Franke (Loan – £0.1m) for a combined £33.9m.
This led to a net transfer income of £29m, up from £17m in 2018. This was their third consecutive net transfer income as the club came to terms with relegation in 2016.
The new signings were no doubt a resounding success as the club achieve promotion. A special mention has to be made of the free transfer signing of Pukki who is arguably one of the greatest bargains of the last decade as he scored 29 goals in the Championship to finish the season as top scorer.
Daniel Farke successfully replaced key young players Maddison and Murphy who were sold to help the club meet Financial Fair Play requirements and ease the stress on their finances.
The sales of Maddison and Murphy were recorded in their 2017/18 finances and hence the club only recorded a profit on player sales of £2m in 2019.
Transfer Debts
In debt terms, Norwich owe £14m in transfer fees, of which £13m is due in 2020. However, fortunately the club are owed £25m in transfer fees but only £7m is due in 2020, meaning they may have a short term cash issue in paying these which will need to be resolved (probably via an overdraft or short term loan).
Norwich also potentially owe clubs and players £33m in contingent transfer fees and contract clauses should certain conditions be met. It is unlikely the full amount will ever become payable.
Cash
In cash terms, Norwich spent £10m cash on transfers in 2019, however received cash of £21m, a net cash inflow of £11m which was much needed.
Net Debt Analysis
Norwich’s cash position took a tumble in 2019, falling from £16m to £2m (88%) as the club’s revenue drop had to be met by their existing cash reserves (and a new overdraft facility).
The £11m cash inflow from transfers was vital in alleviating any issues relating to the size of their overdraft.
Norwich typically operate with little debt, however 2019 saw debt levels quadruple from £6m to £24m (300%), owing to a £20m overdraft facility which was needed to make up for their short term cash shortfall.
Hence, a net cash position of £10m fell to a net debt position of £23m. This isn’t something Norwich fans should worry about. This is largely a short term issue that will be resolved following promotion when the club receive a huge uplift in revenue from the riches on offer in the Premier League.
Norwich seem to have learned from past mistakes and have been financially sensible this year in their approach to surviving in the Premier League, meaning even if the club are relegated they will be in a financially secure position that should aid them in returning to the Premier League if the worse scenario occurs this season.
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