Shortly before Christmas 2017 I wrote a piece reviewing City’s financial situation. Looking at past years accounts and predicting a less-than-rosy future. I recommend a re-read (along with the comments).
This week the 2018 accounts were released. This report covers the financial year (FY) from July 1st 2017, to June 30th 2018.
It’s been a particularly busy and complex period for Norwich. It covers sales dating back to Jonny Howson and Graham Dorrans, through to this summer’s deals for Josh Murphy and James Maddison. We saw the club bond inject £5 million into the accounts. Contracts have been renegotiated, while others were let go.
So, what are the results and how did my predictions fare?
- Income, excluding transfers dropped from £75M to £61M (I predicted £62M). This drop was expected.
- Player and Staff costs dropped £1M from £55M to £54M (I predicted £47M).
- Non-Player and Staff costs rose from £35M to £38M (I predicted £30M).
- Total expenses increase from £91M to £92M.
- “Gain on disposal of players’ registration” is listed as £48M (I predicted £12M for transfers up-to Dec).
- The club reports £16M cash in hand. This profit comes entirely from player sales.
Overall the sheer volume and value of players sold saved us last FY. What is surprising is that costs weren’t driven down as expected, or, in fact, at all.
What does the future hold?
What does this all mean for the 2018/2019 season?
- The £61M in revenue last FY featured the final parachute payment. This FY, without player sales, revenue will be around £32M. A £30M decrease.
- Expenses, which I had predicted a dramatic reduction of, barely moved at £92M this FY. This is concerning because £32M revenue vs. £92M in expenses won’t work. I believe this is one reason Steve Stone is not at the club and our new COO is going to be penny counting. Some expenses are non-repeatable, such as the new pitch, but new expenses will appear, such as the academy renovations.
- The club states they have a £10M tax bill to pay on sales.
- Without aggressive cost savings and further player sales there remains a gap of £30-£50M this year (I had predicted £37M). I appreciate that’s a wide range, but we are without insight into the structure of payments for Maddison and other sales. Either way, it’s sizable.
- The club has stated they will be in a “cash-negative position” by Christmas. We just witnessed a transfer window worth around £40M and within four months of it closing, we’ll be in the red.
Unfortunately, the books continue to paint a bleak picture. Being in debt at Christmas will increase the need to sell players, just as the team is coming together. Our owners are debt adverse and unwilling to invest, so I’d expect 2-3 good players to leave, just to keep us afloat until next summer.
Expenses must be driven down, so, unfortunately, players like Klose will be candidates. But savings must go beyond player wages and deeper into the club. As for what this means for the bond, I’m unsure.
What is clear is that that the funding hole left by the end of parachute payments remains.
I finished the last piece with these thoughts “we’re out of money and we’re out of time” and “Enjoy Maddison while you can.”
This time I’ll finish with this – We’re out of money and out of time, enjoy Klose and Lewis while you can.
For transparency, below are my original predictions (est.) vs. the actuals. It appears my pessimistic predictions for cost savings were, in fact, optimistic.