As a football fan working in accountancy, I’ve always had an unusual interest in the financial side of football, especially Norwich City.
I was one of the many who bought a few shares in 2002 and, as a result, I receive the annual accounts from the club and attend the AGM, where we can gather the odd snippet of information giving a few additional details that are not apparent in the accounts.
The financial results are often fairly predictable. Premier League status leads to an increase in expenditure but income increases by an even greater amount so we tend to make modest profits. When in the Championship, income plummets and, even in the years with parachute payments, we only just about break even.
Fortunately, we have not experienced many years without some form of Premier League income as, if we did, we would face some very awkward decisions if we had a prolonged spell outside of the land of milk and honey that is the Premier League.
The £38m loss made in 2018/19 gives an indication of the stark reality that less successful clubs than us face and why the club is determined to achieve a minimum of ‘top 26’ status.
Looking over the past decade, Premier League money has formed the bulk of our income. Even though we are a well-supported club, gate money is relatively insignificant. But there is another form of income – profit on player trading. The club’s Head of Finance, Tom Denby, highlighted that this has brought in £150m over the past seven years.
Good recruitment and development are vital for the future of Norwich City FC. If we get this right it can lead to success on the pitch and the riches of the Premier League or, at worst, it can cover the shortfall we would face in any lean period in the Championship.
In light of this, the accounts for 2020/21 are very illuminating. The profit on player trading in that year turned a loss of over £25m into a profit of over £20m. This meant that the impact of Covid has been covered thanks to good activity in the transfer market.
But there is a worrying aspect if we look a little deeper.
The outgoing transfers included Emi Buendia, Jamal Lewis and Ben Godfrey but crucially the incoming transfers did not include Dimitris Giannoulis or Ben Gibson despite the fact that they replaced two of the outgoing players and they contributed to the success on the pitch last season.
Why did this happen and what does it mean?
The timing of these transactions will be critical in how healthy the club appears in the accounts which are just a snapshot of the position at a particular moment in time (30th June 2021 in this instance). By selling Buendia in June and buying Giannoulis and Gibson in July, the finances are boosted at the time of the report.
This is neither illegal nor immoral but you have to consider why it is necessary.
The club is still facing very tight financial constraints, especially in terms of cashflow. Maybe that is the reason for the uplift in season ticket prices and maybe that is why we had a quiet January in the transfer market.
The club faces two scenarios:
The first is where we put a run of decent results together and secure another year in the Premier League. If this happened then many of our concerns would fade away. However, the Board would quite rightly be criticised if they did not at least consider relegation in their planning.
But – scenario two – this is where the recruitment, retention and development aspects are absolutely critical. We need to see those promising youngsters make the kind of leap into first-team football that Max Aarons made. We need to see the likes of Josh Sargent or Milot Rashica turn into £20m+ players. If they don’t…
The fact is, although we might not like to accept it, the nature of football means that the very future of this football club depends on sporting success and there is no shortcut. There is no safety net.
As a self-funded club, we cannot afford the years of failure that other clubs have been able to endure and survive. We need to see our gambles win more often than lose.
This is a reality that is often missed
So it seems John, that our future is going to rely on good transfer business being done.
That leave the massive question, who of our summer recruits is ever going to show a profit, if any?
Good question. At present I think Rashica has increased in value. The others? Maybe we have to wait to see the answer for them. The other aspect is about the promising youngsters we bring in such as Adshead a few years ago. Look at the profit made on Godfrey and Maddison. We should be seeing some of these players emerging. The market value for Idah and Omoamidele is probably quite high but we also want to build a team. We survived the late 90s thanks to selling home produced players but we lost a promising team and ultimately had to make savings in our youth development.
Idah, Sorensen or Omobamidele could make us a profit assuming they get and stay fit soon and show their value but that won’t be until next season (likely to be in the Championship). Sargent, Rashica and Tzolis MIGHT come good but need game time and goals and/or assists. Placheta likewise. There is an opportunity for them to show they do have ability at the Premier League level in the next 13 games and in them we do have an excess of fast wingers who allegedly have an eye for goal. Let’s be ‘avin’ yew!
Max Aarons is in average form giving away goals and penalties so I am not sure he is money in the bank.
Out of the players you named – Idah, Sorensen, Omobamidele, Sargent, Rashica and Tzolis – only Raschica has obvious Premier potential. Omobamidele might do. The others it is highly unlikely we’re making any profit on.
Let’s not forget that the only Webber signing that has sold for any real money is Buendia. One player in five years.
Despite their varying levels of quality, we have not/did not make money, or AFAIK even had bids on, the likes of Vrancic, Stieperman, Leitner, Trybull, Zimmerman, Sitti, Dowell, Mumba, Rupp, McClean, McCallum, Hernandez, Drimic, Marshall etc…
Who is lining up to buy any of our current players for any amount that would significantly influence a 38M quid deficit in running costs?
I forgot to mention Cantwell 😉 Out of sight out of mind. The lad himself said the period at Fortuna Sittard was the making of him. Maybe there are a few in the ranks of loaned out who may yet make the grade e.g. Bali Mumba.
Idah, Sorensen and Omobamidele in my view have potential/age on their side, cost next to nothing. Sorensen schooled CR and Rashford replacing an injured Hanley. I was struck similarly by Timm Klose marshalling Harry Kane in his first game for City.
Shame for Idah to miss the rest of the season just as he was finding his feet.
But Cantwell, it would seem, despite having a fairly good PL campaign and a good Championship one, mustered little in terms of bids and ended up on loan (with possible purchase).
His credentials far outweigh Sargent, Tzolis, Idah, Omobamidele, who at this time have on their CV (at best) ‘a handful of decent performances in a poor team, with little end product’.
No one is looking at our players’ stats and thinking ‘we must buy those’. Honestly, I’m surprised we did.
Gut feeling is that Omobamidele will go far. Idah will have a decent value because of the premium for his position. Rashica will be worth a lot but we also need a competitive team. I’m not sure that we intended or expected to keep Buendia last season and we can imagine the difference an early sale would have made.
I agree totally John and have been saying for ages on here that without a Murphy, Maddison, Godfrey, Buendia etc on a yearly basis this club cannot hope to compete to be a Premier ship club.
Even with that it won’t mean promotion to the EPL from the Championship every season.
Would you agree with me John that if we get relegated this season and after two years of parachute payments and no return to the EPL the money we spend on wages will have to be cut massively ?
And I mean massively.
We get accused of no ambition but the way I read the accounts we have really sailed close to the wind risk wise with the salaries we are paying. Am I right ? PS I am no accountant😂
I do feel Dean Smith is doing a very good job and feel confident if we are relegated he will have us in the playoff areas as a minimum next season. So hopefully all this will be for another day.
But I have always felt that with self-funding it means recruitment of players and the appointment of the coach have to be spot on, there is no room for error.
Despite improvement in the team under Smith I am still not convinced by last summer’s business.
Two or three are now showing their class which is good but is it too late ?
Not getting another striker in January was also a bad decision. Even getting Hugill back from loan would have been a help. Especially as the way we play now will suit him.
I agree that there is a danger that we will have to make massive cuts in the scenario you describe. That is a major fear of mine as success on the pitch can be denied by a simple mistake or a dodgy decision or a moment of brilliance by an opponent. In an earlier answer I suggested that we didn’t originally expect to keep Buendia last season, that would explain how we were sailing close to the wind in terms of salaries. Fortunately that paid off and we are back in the money to a degree. Going back to your scenario, we might be able to survive for a few years by player sales, the likes of Omobamidele and Idah are already showing potential for big fees but as you say we need to produce one or two every single year and maintain a strong squad. We faced a similar situation back in the late 90s and our academy produced the likes of Johnson, Eadie, O’Neill and Bellamy who covered the deficit and improved the team before their transfer but the gap is wider so we need to sell more and ultimately the question would be can we afford the academy which I understand costs £5m per year. At present I’d say it is delivering more than it costs but if the cash runs out maybe we would have to do the unthinkable
Hi John
All the names you mentioned were at the club prior to SW and Farke arriving except Buendia he is so far the only player that SW has recruited to make a profit.
Would the others including Massison have faired under another set up we will never know possibly and as they say cream rises to the top.
If you also add the Murphy twins that brought in a tidy sum then put you hands together and cheer self financing but personally looking at the recruitment of possibly talent I can see a big short fall in the medium to long term.
At present the recruits from other academy’s are costing city up to £1+m in fee’s and clauses but many aren’t getting time at the club to progress, loaned out to lower league clubs for experience but not getting game time, we seem to have stopped using Dutch and Belguim clubs for this purpose.
The stream of possibles from the EU on lower fee’s has dried up so we are looking more at the scraps from the top 6 that have not made the grade and hoping against hope they might be a late developer.
Upgrading Colney was long over due and sadly harps back to the ownerships lack of Investment, for 20years we have heard that they are looking into ground improvement and expanding capacity all cost money that city can’t afford and they let that fact out at most AGM but these rvenue streams generate more income and and some time the money needs to be found.
Self funding is a utopian idealistic dream that in the real world just can’t work unless all other clubs work to the same model and restrictions and none of those other 19 premiership clubs are going to vote for that.
Geoffrey Watling was the white Knight that saved city from Robert Chase, The Jones when they took over promised that those days would never return and that they would sell up for the best interest of the club, Chase gave us the European Dream they have given us League 1 more relegation than any other owner yes with a few promotions as well but they have also turned a respected club into a laughing stock.
It’s sadly going to all end badly for the club not only for this season but the its future prospects until they depart or allowed investment in and I can’t see either happening in the near future.
I agree with a lot of what you say but wanted to stick to a few key points in the article and just set out where we are without judging too much. It does annoy me a bit when I hear criticism of the players Alec Neil brought in as for every Naismith there would be a Godfrey and a Maddison. The big difference that Farke/Webber added was the desire to actually use these players. I believe that we have seen a bit of churn in our recruitment department in recent months and that can explain a bit of delay in transactions but I don’t think we have the cash to begin with. I think a lot of what you say is worth covering in another article.
Excellent read John.
Self funding model is a bit of a misnomer. It should rightly be called transfer gamble model.
The whole set up is a desperate effort to fund the continued tenure of our owners who will never be in a financial position to ensure we become an established premiership club.
Rather than a safe pair of hands it takes one bad year of transfer income and the whole thing can fall apart.
It’s time somebody persuaded our owners to look at the viable offers mentioned by the finance director at the AGM.
Good point. One of the things that worries me is that a lot of people seem to think that we are not gambling the future of the club, but we are. We need promotion and we need to see players increase in value. We can not afford mistakes, we can not afford failure. In many ways that is good as we have to act promptly but it would be better to feel a bit more secure. I look at the accounts for other clubs to get a feel for the running costs of a typical Championship club, I used Bristol and that didn’t look good. One that was interesting was Brentford who are actually making 8 figure annual profits on player trading which is what we would need to do
Precisely this.
Many many people harked on about the Naismith deal (10M+) and how terribly we spent our money. Those same people appear to have ignored 50M spent now on some very questionable purchases.
A very good and accurate assessment.
Its clear to anyone with objectivity that the self funding model is only ever a matter of months from disaster. The work of lambert, Neil and farke supported by mentally and webber has kept the club afloat by producing success without the financial backing available to most others.
Failure to bounce back from one of our all too brief excursions to th premier league will cause huge problems. As will a poor transfer window. If there are no crown jewels to flog, the smiths sure as hell aren’t going to underwrite the shortfall.
Promotion in a years time is a necessity. No pressure!
With possible changes to the parachute payments and the continuing purchase of our peers by rich and powerful owners with ambitions its not getting easier.
The shame is that self funding should be the norm although I do accept that any business would require initial investment in order to grow. Unfortunately football isn’t like that, people clearly seem happy to pay good money just to own a football club, in some cases like the Coates family at Stoke I can see them as wanting to put something back into the community, for others I can see club ownership as a play thing or maybe a facility for entertaining contacts. I’m not sure what a poorly performing American investment fund would gain by owning a poorly performing third tier football club but that is yet another story. Given the reality that we face then the price of failure is worrying. Clubs in the Championship overspend, our income is high in Championship terms but would only cover the budget of a Rotherham (that is a general fault of football but still something we have to deal with). My worry is that one day change would be forced upon us rather than being something we look to manage. If I have one criticism of the current set up is that we are potentially allowing change to be something that is done to us rather than something we do.
Great article outlining all the worries I’ve had for a few years. One summer without a major sale and we are f***ed in my opinion. The days of a player earning a testimonial have disappeared. Wes, Russ and Tetts being the last of this breed – and this is only because none of them were quite good enough to move on to bigger and better things. Regarding salaries, I feel we cannot compete already with Chump clubs, let alone Prem also-rans. This is why Webber was so keen to stress the transfer outlay last summer. However with top whack wages of “only” £45k per week we will not get proven Premier League players through the gates of Colney, we will only get the young unproven potential such as was signed to keep us up this season. Players who unfortunately haven’t been good enough on the whole.
I agree with you John. Self funding is only desirable if its the norm and we all have a level playing field.
This king canute like attitude the smiths and their acolytes display whereby we plough a lone furrow is eventually going to lead to disaster. Its just a question of when.
The pig headed refusal to realise this will cause a great deal of acrimony going forward.