Right. It’s that time you were all waiting for. A review of last year’s accounts…
OK, so you weren’t waiting, but it’s really important and highlights whether the club is in a position to back up any of the long term plans the accounts refer to. And, if you want a one-line summary, yes they are.
The accounts show losses of £9m, up a couple from the year before but nothing like the losses of the past and, thanks to some very clear messages from the owners, the plan is for the owners to fund those losses with no third party debts, so losses in search of the promised land shouldn’t scare us too much. In the world of football in 2024 that’s about as good as you can hope for.
MONEY IN
The inevitable consequence of promotion (and remember, these accounts are the first after promotion – Amad, sexy goals, Luton) is a massive increase in TV revenues. We were paid £10m for TV games compared to £3m the year before. Income in total went up £9.5m so, obviously, this is the big win of promotion.
Match day attendance only goes up £1.3m to £11m but I don’t think we can criticise too much. Our fans were awesome in League One and continue to be awesome in the Championship. Sponsorship, conferencing and banqueting and retail make up the rest of the income and this is where we can see work needs to be done.
As a club (without redeveloping or ripping off fans) we can’t really make more money from ticket sales and, until we achieve promotion and TV increases about 10X, that won’t change much year on year. So, if we want to increase income it has to be from off-field activity. Sponsorship only went up from League One to the Championship by £300,000 with retail only going up by £0.5m to £2.7m. With our reach, our fan base and the fact that we’re on Sky more than most, we need to maximise our marketing opportunities. Of course, the club has realised the importance of this and acted by recruiting David Bruce. Curiously using latest available figures we’d be in the top ten in the current premier league when it comes to retail sales with the £2.7m receipts. We sit in line with Aston Villa, but the potential can be seen with Everton making £9.2m, Newcastle £12.6m and Liverpool, Manchester’s United and City and Chelsea sharing £400m between them. We’ve a long way to go but I’m hopeful the recent news about shops, Hummel etc will see improvements to those figures in the future.
Sponsorship is a real issue for clubs and, for me personally, a difficult one to solve. I could point to the obvious acceptance of any name across the chest and pitchside without worrying about who those people are, or take the money of bookmakers without worrying about the damage done by bringing those brands onto the posters and screensavers of children. It’s a difficult one but, at only £1.6m income from sponsorship, I’m sure work can be done to increase that income without throwing all ethics out of the window.
MONEY OUT
Footballers are expensive. Especially good ones. That’s why our wage bill went up from around £16m to £25m after promotion. That figure includes non-playing staff of course and it’s notable that the club employed 40 more people than the previous year (229 in total) with a huge matchday increase from 320 staff to 587. The message from most fans about match days is about queues, hold-ups and, of course, difficulties with the shop and the ticket office. I’ve no idea how this is possible when there’s such an increase in staffing. I can only conclude it’s a lack of direction as we learn from the accounts that club employees are now on an incentive scheme based on ‘success of the business’ so should feel motivated to get it right. Again, whoever takes the reigns from Steve Davison will need to consider what is going wrong with this staffing issue.
The money out that many fans claim is lacking from the board is on signing players, but the accounts show almost £8m was spent on signing players last season (and that doesn’t include add-ons for winning the league etc which are so common in fees these days). For a team coming out of League One that is a huge amount. Whether it’s enough and whether it was spent well is a different question but the accusation the money wasn’t spent doesn’t hold any water.
So should we be spending more on players and their wages? Well, this year Ipswich and Coventry have risked everything by paying the big wages of a striker to get the goals – strikers we were closely linked to. It looks like it might work out for one of them and the rewards of the Premier League (for a year) might be heading to Suffolk. Coventry on the other hand, already financially challenged, have smashed their wage structure to sign Simms and, to be fair to him, he’s done the job asked of him. But his teammates haven’t.
It’s about balancing the risk. And, based on these accounts I feel positive about the balance of gradually increasing costs, trying to increase revenues and not over committing. It’s clear we’re being cautious but, as it stands Kyril and Juan have put £18m of their own money into the club to cover costs. No bank loans, no Glazer-style interest abuse, just investing in their investment to get the club to the Premier League and, accordingly, to a position where they might be able to sell it. And if they achieve that, I’ll be more than happy with them taking their money and importantly not leaving the club with the debts.
The accounts show that the owners plan to turn the £18m (plus future years losses which the accounts say they accept they’ll need to fund) into shares rather than demand it back at any point. But why haven’t they done that straight away? Again, this is a balanced position which, if I was advising them, is exactly what I’d recommend. It means they can decide later what is the best position, what types of shares they should be, what the potential buyers might prefer etc. It doesn’t distract from the key message which is that their intention is to only take that money out of the club as part of their eventual disposal of the club, not as and when they fancy taking profits when they arrive.
All in all, the accounts show a business trading in a world where losses are relatively normal. They show progress, a plan to invest in areas where the club is weak and to protect the club in areas we’re stronger. After previous ownership and management models, it’s a blessed relief to read the accounts and not worry for the future.
And if you’re an accounting geek, enjoy page 35 of the accounts, there’s a fascinating discussion of investment property, previous accounting error and a mistake in disclosure... wait… no, come back… honestly it's interesting…
