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