Among 36 pages of numbers and words, one phrase stands out. It is on line 11 in page two of Norwich City PLC’s annual report. “The Club’s future strategy is to strive to be an established Premier League club.”
Other parts of the document are not suitable for those of a nervous disposition. The accounts pages detail the devastation wreaked by COVID-19 and a blooming huge wage bill last season – a third bigger than in any previous Premier League campaign.
But I used a highlighter pen on that phrase on page two. It represents a sea change. The previously stated aim of being in the top 26 in the land – not dropping below the play-off places in the Championship – has been significantly upgraded.
We can delay debating what it means, and worry about how realistic it is, on another day. For now, let’s just marvel.
Despite another relegation – this one uniquely dismal – and despite the pandemic forcing the club’s finance department to remodel what the future might look like almost daily, the club’s board and executive committee have targeted becoming part of the EPL establishment.
The charge of “no ambishun” is now, officially, a load of ole squit.
So let’s deal with the other frequent accusations and questions.
1) Where’s the money gorn? Look at all the loot City got just for being in the Premier League. Look at all the transfer fees City have been paid. Look at how little they spent on transfers. Where’s the money?
It’s mostly gone on wages, as it always does. Here are the figures.
In the 18-19 season, wages and staff costs were £54m on a turnover (total income) of only £33m.
Pardon?
Yep. In our promotion season the wage bill was 162 per cent of our turnover. It was the first season with no parachute money from the Premier League, so turnover fell by almost half. But we had to pay promotion bonuses (hooray!). We still had folk like Stephen Naismith on our books and had to pay them the promotion bonuses (boo!). City made a loss of £38m that season.
In the 2019-20 season in the Prem, wages and staff costs were £89m. That was 32 per cent higher than the record set in the 2015-16 season in the top division. It was also 75 per cent of our turnover. Added to all the other operating costs that meant that very nearly all the money really had gone. The club made a profit (before tax) of just £2m.
2) How much does Delia Smith salt away for herself?
Supporter Duncan Edwards satirises that question by Tweeting about the money being in her “#hambag” but such is the alarming ignorance out there that a lot of fans agree with the joke without realising it’s a joke.
I’ve had people insisting to me that “things can be hidden by accountants” – but independent auditors have to report all financial transactions involving the club and its directors.
The 2019-20 accounts demonstrate this transparency. They report that the club paid some money to NC Internet. That is the company, owned by Delia and Michael Wynn Jones, which operates Deliaonline. In 2019-20 the club bought services from that company worth £45,000 and owed the company another £9,000.
I’ve no idea what any of that was about. I don’t talk to Delia about money. But I know that Deliaonline employs people. So, presumably, if Deliaonline does anything for the club, it charges the club accordingly so as to pay its staff from the correct pot.
Elsewhere the accounts show that no directors were paid any salaries, that Delia and MWJ spent £5,000 at the club on goods and services, that vice-chairman Michael Foulger spent £1000 in the same way at the club.
Foulger has £4,400 worth of “preference shares” and Delia and MWJ have £3,025 between them. That is basically money loaned to the club. Preference shares don’t confer any extra voting rights, but interest can be paid on them.
It is possible that Delia and MWJ accept dividends on their £327,000 worth of ordinary shares. I’ve never asked them. But no dividends will be paid to any shareholders (including me) while the pandemic is continuing and the total that would be payable to all of us is only £63,000.
The final piece of financial information about Delia and MWJ is that they loaned the club £250,000 in 2018-19 and it had not been repaid at the time the 2019-20 accounts were prepared.
So the true story of the last two seasons is very different to the one constructed by those in the national media who don’t bother to investigate.
It is this: Norwich City ran up big losses as they barnstormed to the Football League title. Delia and Michael stumped up a quarter of a million quid to help with cash flow.
Then, once in the Premier League, the club balanced the books after the promotion splurge, paid back £5m to those of us who’d bought bonds finance the rebuilding of the Colney training and academy facility, plus £500,000 in interest (thanks!), chipped in towards the Community Sports Foundation’s new hub, The Nest and spent just about every remaining pound trying to stay up.
To be scrupulously fair to the “no ambishun” critics, it is true that, without COVID-19, City would have made more than that £2m profit. The initial aim was to be £20m in the black. But, as the season unfolded, the projected profit was cut to £14m — then the pandemic reduced it to £2m.
It could be argued that City shouldn’t have been planning to make a profit in the Premier League; £14m to £20m could have bought a fit centre-back or two.
But … wages. You’d have to pay the new player(s) out of that £14m or £20m so you’d have much less for the transfer fee(s).
And really, in the context of how far short City fell of Premier League survival, aiming for a £20m profit in case of relegation is surely – I hesitate to use the word because it triggers some fans – prudent.
What we can say for certain is that another season of accumulating losses on top of the £38m promotion splurge would have brought an existential crisis for Norwich City upon relegation – even without Covid.
The Corona crisis is where the cold language and limited remit of the annual report are not adequate. They cannot convey the amount of work that has been done exploring what the impact will be as football continues without spectators, when broadcast revenue and sponsorship deals cannot be taken for granted.
New Finance Director Anthony Richens took up his duties just before COVID-19 struck. He might be cursing his own timing, but he was able to tell the auditors that: “In all reasonable scenarios we believe the club is in a strong position.”
In a landscape where football clubs whose details I know are contemplating not being able to survive this season, that statement is a beacon of hope and sanity.
And elsewhere in the annual report there are signs of more hope. The report is fulsome in its praise of the Foundation’s work, not just in going ahead with The Nest at such a challenging time, but in helping the club respond to Covid.
I can vouch for the fact that the relationship between the club and the Foundation (its stand-alone charitable partner) has never been better. It is a proper partnership, and the work the club and Foundation did together in the first lockdown – delivering care packages, checking up on the welfare of the vulnerable, devising new, on-line activities and so-on – will now continue to develop in Lockdown 2.
And, whenever a new normal arrives, the Foundation will be at the forefront of Norwich City’s efforts to tackle mental and physical health problems, isolation, unemployment and lack of opportunities in Norfolk.
The club we care about in the fine city is a good club, run and owned by good people. And now it has set a course for being established in the Premier League.
That’s bound to get a reaction from the “what we need is a billionaire Chinese/Arabic owner” lot, Mick! Especially your penultimate sentence!
I tend to dismiss comments from those that ask “where’s the money gone?” or those who assume the money is being salted away by the owners as the accounts clearly answer those points (or at least as clearly as accounts can). These people are often countered by those that say we are financially secure or “I quite like being in the Championship anyway” and I probably spend more time dealing with these people as yet again the accounts give the answer and it is clear that even as these people claim to support the owners they do not listen to what the Board say about being a top 26 club and why (or established PL club as the narrative has changed). I noticed the massive loss last year but realised that this included both promotion payouts and the legacy of some high non-productive contracts, so I asked Ben Dack at the AGM for an indication of what the position would have been without those factors and his answer was that it would have been a loss (funded by the sale of Maddison and Murphy in the previous set of accounts). All fair and transparent but it also shows the reality of life in the Championship. The Board quite rightly realise that the survival of the club depends on success on the pitch. With high ticket sales and strong commercial activities we are better placed to sustain Championship football than most but even we need parachute money to breakeven. The other option is player sales but effectively we funded the purchase and development of the likes of Godfrey, Maddison and co from PL money. I think the Board have the correct vision and ambition and that football should be self funding but here is the rub, football is not self funding. We are managing it but our model is very reliant on success on the pitch and that is not guaranteed. I would guess Peter Coates at Stoke is the owner that ticks two boxes, a passionate fan with money. Imagine Michael Wynn-Jones with a billion pounds in his pocket. Coates can support his club through a few bad years, which is probably not the case with us. In a way the positive side is that we have made timely decisions but the Covid situation shows that even with the best planning something comes out of left field. My biggest concern that I have previously expressed is whether we ever have a forced sale and I would expect a lot of unwanted interest. The accounts show a net value of around £6m, this includes an estimate of player values and also includes the value of the land (these are areas where there is uncertainty even in audited accounts). How is the land valued? Is it based on current use? Is it based on cost less depreciation? Is it based on open market value? These would all differ but you can guess that in the event of a forced sale some purchasers would look to maximise a return on assets (selling Colney for housing perhaps?). We need a fighting fund to sustain the club, if this is not through new benign investors then maybe it needs to be from us
Maybe it was just me, but I never previously had an issue with the ‘top 26’ quote. Given that we’ve had just 9 seasons out of 29 in the Premier League since its inception, why wouldn’t we want to be aiming for the ‘Top six’ of the Championship if we weren’t in the Premier League?
I think, Mick, you’ve confused the nominal value of both the preference and ordinary shares with their actual likely worth, but the point on dividends for ordinary shares is relevant, but only in the context that the Club doesn’t usually declare dividends on these shares.
Hi Mick
That was a very informative and credible insight into the Club accounts. I’ve not received a copy of them myself for a couple of seasons since I donated my shares to the Canaries Trust and I’ve never been too good with figures anyway so thanks 🙂
I don’t think any MFW readers or writers [even me] seriously think anything is hived off into #hambag or handbag.
The only thing I don’t get is this £250k loan from the Smiths to the Club to help with *cashflow*. To me it seems such a tiny sum in the great scheme of things – the exact average value of a house in the UK just now apparently. It seems a little strange to me but of course it might have been a gesture of goodwill for a specific reason I know nothing about.
I always wonder where the puerile practice of mis-spelling words I.e “hambag” and my personal favourite “hambition” sprang up from. It stems from a need to ridicule those who hold an alternative point of view.
Moronic and childish. Grow up.
Agreed – that’s one of several reasons why I wouldn’t touch either Facebook or particularly Twitter with the butt end of a $hitty bargepole.
Use FB messager just to jeep intouch with old and new people or try whatsapp
The first priority of any club is to still be in business for the next season. Without that all the other ambitions fade into a swiftly evaporating cloud of wishes. We are fortunate to be in a relatively healthy position with owners who identify with the club for far more than just financial reasons. I like that. Norwich City will see 2021/22. I like that too. And I wouldn’t swap our current state of affairs on and off the pitch with any other club in the Championship. The Premier League may be a different matter.
Well said.
Thank you Mick for the excellent piece on the accounts. Like another person has said I have never had a problem with the top 26 ambition. I think that is realistic, especially given the “big” clubs that would give their right arm to be where Norwich currently find themselves, for example Sunderland and Sheffield Wednesday to name but two. I am not sure that being an established Premier League side can be achieved with the financial resources that the club have access to. I do wonder if it has been said in response those that claim the club lack ambition and did not spend enough to try to stay up last season.
Given that the club were heading towards a profit of £14 million for last season before Covid 19 struck then it is clear why we did not splash out £40 million like Sheff. Utd. or £100 million like Aston Villa did or even Fulham the season before that. Like you I doubt that spending that amount on wages, agents fees and transfer fees would have bought us anyone much better than we already had. It may have helped to have another body or two during the injury crisis. I still recollect the huge number of fans, me included, that felt our title winning squad could well flourish in the Premier League. Their increase in wages was large from what the accounts have told us.
I am always reassured that the club’s external auditors have done their job to independently verify the truthfulness of the club’s accounts and that they are prepared in a way that complies with all relevant legislation and best practice. That legislation is there to protect shareholders and other stakeholders and to expose any financial wrong doing by the Board. It also exposes the financial transactions the owners have with the club. There has never been any suggestion that Delia and the other Directors have been lining their own pockets. In fact for many years it has been the reverse as they have kept the club solvent.
I think the club has got the best management team it has had in many a long year and that it is best placed to survive the Covid crisis. I would have many reservations in bringing in a hugely wealthy investor unless they are a long term supporter of the club.
I think what would be interesting is for someone to look at the accounts of those clubs that have been found guilty of breaking the financial fair play rules, those that have gone into administration and then contrast those to Norwich’s accounts. I do not want the club I support to cheat, which is what breaking the FFP rules is. I do not want the club I support to run up huge debts that it cannot meet because that would be at the expense of many small local companies and the tax payer.
OTBC
John Holland:
Note 14 and the paragraph headed ‘asset values’ in the directors’ report deal with how the land is valued.
The land and buildings are currently valued at £33.8m (up from £30m in 2019). The land value is based on an assessment of its current worth and is not depreciates. Buildings are valued at cost or deemed cost and depreciated in a straight line over 40 to 50 years (or remaining useful life).
You make very good points about the truth of life in the Championship. It’s blooming difficult and hand-to-mouth.
But, as you acknowledge, one route to self-sustainability is through selling players.
It’s more than just selling them though; it’s about recreating players to whom value can be added through coaching and use.
So the ‘fighting fund’ you want is effectively the stockpile of improving players. The accounts show we went from 34 to 60 players in 19-20, with 22 out on loan.
That big recruitment last season supports your point that we use Premier League income to finance the purchase of players — the examples you cite, Maddison and Godfrey, were bought in the McNally era, in the season after the playoff final triumph.
But the difference now is the scale of the recruitment and the acknowledgment that many will be sold at a profit without getting near our first team.
And there’s another difference. Daniel Farke’s specific brief includes improving and using players from that stockpile of good young players. Winning matches is only part of his job.
Saturday’s substitutions show he can sometimes fulfil all 3 elements of his job description.
Gary Field
Yes, I used the stated value of shares rather than speculate on what they might realise if they were for sale, because they’re not.
I didn’t mention Trump. I’m just Biden my time.
Mick thanks for the analysis. I’ve always felt the most important bit of the accounts is the cash flow statement (p18). This year is shows we raised a £39.7m short term loan and repaid £29m of it in the year but the narrative is silent on what it was for. It also shows a misleadingly healthy cash position of £44m because creditors increased by £46m so the one offsets the other. Finally towards the bottom of the statement alongside Preference dividends paid is the question in brackets ( were these actually paid?). This has no place in the audited accounts and tells you the new FD and BDO could usefully read the final drafts through before sending the accounts to be printed!
The Premier League share out the broadcast revenue in tranches throughout the season, but clubs need to spend and commit most of it at a very different rate, and so the standard practice in the division is to take a short-term loan against that income. I assumed that NCFC did that but it is also possible that the impact of Covid last season created so much uncertainty about revenue that loans were taken as a buffer.
You’ll see that since 18-19, some of the short-term loans have been restructured, paying back a £20K overdraft (which was repayable in 12 months anyway) but taking out a £10K short-term loan. Again, based on what I know of what happens at other clubs, I imagine NCFC found banks eager to make short-term loans in the Premier League rather than insist on a more expensive overdraft facility.
These are tiny sums, though, and just evidence of running a business with varied and variable income by easing out the bumps and troughs.
As I understand it the Premier League TV payments are not all paid at the beginning of the season so many Premier League clubs take out short term loans so they can spend the TV money before it is received. They pay it off as the TV money actually comes in. My guess is some of the loan was not repaid as the last tranche of money will appear in the next accounting period.
It is true that accountants can hide things, but if they want to do that the first step is generally to set up a chain of companies that makes it difficult enough to pin down who owns what, never mind find which of the subsidiaries actually has the trading business in it.
The £250k loan does seem a rather strange amount, but my guess is there was a short-term timing issue over paying HMRC either income tax and NI, or VAT. One thing any club will be desperate to avoid is getting on the slippery slope of not paying HMRC.
Ironically what concerns me about these accounts is they are possibly too good.
From the Times today “The top flight has offered £50 million to Leagues One and Two — £30 million of that as loans — with support for the Championship case-by-case.”
What does case-by-case mean then? Does it actually mean “basket-case-by-basket-case?” Because that’s certainly not where we are at. We’ve built up our crowd, developed our players, looked after ourselves.
If handouts are used to replace Covid-induced lost crowd revenue right across the Championship, that’s fine. We are among those who’ve lost most and should thus be given most. If though it’s a case of helping those making the biggest losses – self-induced as many of them are – it’s not.
Totally agree with your last point. The bail outs should not help those that have created their own financial mess.
Keith, you have put your finger on and important and difficult issue. Most people (it seems) want the Premier League to bale out the rest of the football pyramid but, by definition, that would mean underwriting clubs who are in trouble. And often they are in trouble because they’ve given themselves a competitive advantage by paying players more than they could afford or not paying local tradesmen. Sometimes there are corrupt practices involved and sometimes club owners have spent club money.
The Premier League have other concerns about the Championship because of the opaqueness of some of the ownerships. To whom, exactly, would they be giving money?
Hi Mick, a very interesting article.
I only have a small understanding of accounting so having it explained like this really helps.
What I have known for some time is that if we keep paying the wages we have in the past we will need a Maddison and a Murphy to be sold every season if we remain a championship club.
And it seems the overheads for running the club seem to be very similar whatever league we are in.
I like a lot of others had no problem with the Club aiming to be one of the top 25 clubs in the country. In these days of billionaire owners that in its self would be success.
And the idea that Delia or Michael are syphoning money out of the club like two old geriatric Artful Dodgers is clearly preposterous.
While I also get angered by the likes of Richard Balls and other supporters who say as soon as we get rid of Delia and Michael it will be the land of milk and honey, season after season of Premier League and maybe another european journey, which I am sure supporters of Bolton, Charlton etc have echoed similar things about their boards in the past.
Look how much Maurice Evans has put into Ipswich, and did any of us contemplate that in our own lifetimes we would see Kings Lynn get further in the FA Cup than our county cousins ? Money is not a guarantee of anything. To me Manchester City have vastly under achieved in the last few years and they have spent billions.
But I also get angered Mick when Delia says as a club we are not looking for investment. Whatever other business does that ?
While we have the present management team, Cheif exec and scouting team we are unearthing some fantastic talent which will at some point be sold to keep the club going ( and lets be honest Arsenal are a selling club)
But that cycle of promotion, relegation, £30-40million in sales to start the whole process again may not last forever.
Say we appoint another Gunny or Roeder there will be no guarantee of success. Delia must be open to investment in the best interest of the club.
It is not her club, she may own the shares but the club belongs to everyone of us, she is a guardian and like Geoffrey Watling she has done some great things for the club.
Like someone else we know over the pond in the great old USA you need to realise when it is time for you to go. Or at least accept help even if that means losing some of your power.
There are massive risks but Southampton, Wolves, Leicester have excellent owners so though I do fear getting a Charlton, Blackburn, Bolton owner at some point if we want regular Premier League football we are going to have to take the risk i’m afraid.
Hi Tim
On “not looking for investment”. In their 23 years as majority shareholders, Delia and MWJ have only had one solid offer of “investment”.
In 2008, Peter Cullum, with the connivance of the EDP, made a big play about offering £20m. He made his move with City near the foot of the Championship. In fact the offer was £5m, all of which was to be spent “on players”. If City stayed up, he said, he would make another £15 million available for players.
That didn’t stack up. How would the wages of the £20m worth of players be paid? What about the club’s debts (about £20m at that stage, because of the recent South Stand rebuild)?
If D and MWJ had accepted the deal and City had been relegated, City would have been stuck with £5m of new players and probably have gone bust.
Understandably, despite the EDP campaign, the offer was not given serious consideration.
At around the same time, D & MWJ courted local couple Andrew and Sharon Turner, with a view to virtually giving them the club.
As a show of good faith, the Turners loaned the club £2.5 million and, for their part, D & MWJ gave them free reign to look at, and involve themselves in, every aspect of the business. After 15 months, the Turners resigned from the board. My interpretation of events was – exactly as I have seen elsewhere – they had assumed that their business expertise could find savings, efficiencies and new revenue streams that others had missed, but actually discovered that it would take more than their entire fortune to make an impact in football and so walked away.
Those are the only two occasions when “investment” or takeover discussions got beyond the due diligence stage; other would-be suitors were found to be charlatans pretty quickly and others with whom D and MWJ were quite prepared to talk to – Tony Fernandes and David Gold fell into that category – could not be persuaded to even consider a purchase.
When Alan Bowkett became chairman in 2009, he hired Keith Harris to look for “investment”. Harris brokered Randy Lerner’s purchase of Villa, played a part in Abramovich’s Chelsea takeover, was part of a group who tried to get the Glazers out at Man U, led the Icelandic takeover at West Ham and, more recently, brokered Shahid Khan’s purchase of Fulham.
Hiring Harris was a proper attempt to find a buyer.
But I knew Harris well at that time and he told me categorically that there was “nobody out there for Norwich”. By then, we were in League One and saddled with debts which had reached £23m. Anyone who wanted to buy into an English club could find many much more attractive propositions.
Bowkett, McNally and Lambert saved Norwich from that penury, but D & MWJ had wearied of all the time, effort and money spent on looking for “investment”, and in a 2016 intervirew with Henry Winter said they’d “never” sell and had stopped even talking to suitors.
I think Henry did them a disservice. He didn’t give any context to Delia’s remarks; he just transcribed the tape of a long conversation.
I’ve had countless talks with her and her position has always been that she and MWJ are terrified of doing a deal with someone who turns out to be like SIS (who shafted Coventry) or the Venkys (Blackburn), Ken Anderson (Bolton) or Oynston (Blackpool).
And no, they don’t talk to anyone who shows an interest now – but they get that person checked out properly by professionals. And, defiinitely, positively, if someone emerged who seemed a trustworthy, genuine buyer with reliable plans to improve the club, they would look at the potential deal very seriously.
But they want the new self-sustaining model to work because they think it is good for football.
That is a really useful and interesting insight. Thank you Mick.
Thank you so much for the reply Mick.
I do not believe there has been any serious offer for the club in the entire time Delia and Michael have been at the club.
The Peter Cullum offer was rightly completely rejected. It was a complete non starter.
My own sources have indicated that Delia and Michael actively sort investors some years ago, including wealthy people in racing circles.
It is interesting you say Henry Winter did not put Delia’s comments into the proper context, I think this has harmed the supporters view of Delia ever since. Truthfully myself included.
I can also understand her frustration that no one seemed interested in such a well run club. She is rightly proud of the fact despite the awful money problems that the club has been through they haven’t put the club into administration therefore leaving many local business’s out of pocket, completely different to Ipswich Town’s behaviour over the years.
Just like Delia I too have big worries of selling to an unsuitable group or person, as I have said many times on here. Just look where founder members of the Premier League, Oldham are at present.
There is a great saying which is so truthful and that is be careful what you wish for.
So I find myself between two stools, loving the fact that we have performed so well
( last season apart and to be honest lockdown affected that ) with hardly any money. Out performing rich clubs like Stoke, Forest, Derby etc but also concerned as to just how long the self-funding model can last.
And this worries me too. I am now 63 and would quite happily for the rest of my life see City in the Premier League or fighting to get there. But I can understand that some younger fans may have loftier ambitions than me.
OTBC
Thank you Mick, a really valuable insight into any potential sale in recent times.
Mick, I’ve always questioned whether the Turner’s departure was purely NCFC related, or also linked to the then ongoing meltdown within the financial markets?
Pleased to see our owners have upped their ambitions and now intend to establish the club in the premiership.
It will be interesting to see how they will secure the £40-100 million investment in order to achieve their ambitions.
Really informative and dispels the myths of the ignorant. Thank you