Stoke City 2016/17 Results: Bring on the dancing horses

Introduction

We like Stoke City, owned by a local who has underwritten the club’s rise to the Premier League, free coaches organised for fans to away matches, decent ticket prices, oat cakes (if you’ve not tried them you are missing out), cheap beer…and Peter Crouch, one of the game’s most likeable players.

The club’s financial results are similar to the club itself. Nothing too flash, solid, dependable, which begs the question, why on earth have they just been relegated?

Summary of key figures

Income £136 million (up 30%)

Broadcast income £108.7 million (up 37%)

Wages £84.9 million (up 3%)

Wages to income 62% (79% in 2016)

Profit before player sales £3.7 million (£11.9m loss in 2016)

Player additions £35.9 million (£51.4 million in 2016)

Borrowings £75.7 million (up 27%)

Money wasted on Berahinho £12 million (nothing in 2016)

Income

Stoke’s income rose by over 30% in 2016/17, which on the face of it, despite falling from their traditional 9th place to 13th, looks impressive.

This places Stoke broadly where you would expect it to be in the Premier League food chain. Not bothering the elite clubs with their football tourist fans and global commercial partners, but neither are they paupers.

Broadcast Income

Stoke are a club who are very dependent upon continued membership of the Premier League as broadcasting income is the key element of their finances.

A new Sky/BT domestic deal, coupled with the Premier League’s amazing ability to extract increased fees for broadcasting rights overseas, especially in emerging markets such as Asia, means that EPL clubs are sharing just over £8 billion over the three seasons commencing 2016/17.

As a consequence, the proportion of total income that comes from broadcasting for Stoke has increased from 69% to 80% since 2013. There is nothing wrong with this, but now that the club has been relegated,  even with parachute payments, there will be a big hole to fill.

The decrease in the final position from 9th to 13th in the table cost Stoke about £7.5 million in ‘merit payments’ in terms of broadcasting rights distributions. This is because 25% of the amount paid out is based on the final league position.

A further 25% of broadcast distribution is linked to the number of times a club appears on live domestic TV. Stoke had the third lowest number of matches (nine) broadcast, and so suffered relatively to small London clubs such as Crystal Palace (who had 14) who have more local derbies, which are popular with the TV companies.

Parachute payments are yet to be finalised, but are looking at approximately £41 milion in 2018/19, and, if the club don’t bounce back to the Premier League, falling to £34 milion and then £14 million in the following two seasons.

After that the club would be part of the EFL TV deal, which brings in about £6.5 million a season, slightly more if you are regularly chosen  for live TV.

Stoke sell out the Bet365 stadium every week, but it is not a huge cash generator. The Potteries is not a wealthy area of the country, and the Coates family, who own the club, have kept prices low.

Matchday income for 2016/17 was down 14% to £7.2million, which is the lowest for a number of years. This may be partly due to work undertaken to expand the capacity of the Bet365 stadium to over 30,000 for 2017/18.

There are not many figures available for other clubs yet for 2016/17, but an analysis of Stoke’s matchday income for the previous season shows that it is towards the bottom of the division in this regard.

Stoke’s ‘other’ income, which includes commercial deals and sponsorship, rose by 23% to just over £20 million. How much of this comes indirectly via the owners at Bet365, who are shirt sponsors as well as stadium rights, is unclear.

Expenses

Despite the overall 30% increase in income, Stoke managed to keep a lid on wages in 2016/17. The wages bill only rose by £2.7m (3%) to £84.9 million. The previous season wages increased by 24%, so it appears that the club decided to gamble to a degree in 2015/16 on spending on players (and wages) prior to the new TV deal in 2016/17.

This is evidenced by the amortisation charge (player costs spread over the contract term) rising by nearly a third to £23 million.

The reason for such an increase is that after a couple of cautious seasons, Stoke had record spending in 2015/16, with mixed results, as Imbula, Shaqiri and Joselu were signed.

Last season Stoke somewhat bizarrely signed Said Beharinho, who most West Brom fans would have driven to the Potteries for nothing, and Joe Allen took up the bulk of the £35.9 million.

As most of these recent signings are on long term contracts, the amortisation costs will remain relatively high for a few more seasons.

The summer 2017 transfer window was a relatively quiet one for Stoke, the accounts show a net income of £1.9m as the signings of Wimmer and Indi were offset by Arnautovic and Joselu leaving.

It’s not just the players for whom wage restraint exists at Stoke, one director, in all probability chief executive Tony Scholes, had a 14% pay cut in 2016/17. Admittedly this took his paypacket down to a still considerable £806,000, which is the cost of a good night out in Hanley or Burslem.

Such levels of pay are quite common in the Premier League, with  ten clubs having highest paid directors on a million plus a year,  a decent return for deciding on what colour next season’s away kit will be.

Profits

As a family run club funded by the Coates family, the owners are not particularly motivated by making profits.

Profit is the residue after subtracting the running expenses of the club from the income. Prior to 2014 most clubs in the Premier League were losing money. Despite the riches of the game, income went out almost immediately in what Alan Sugar referred to as the ‘prune juice effect’. As each new TV deal was signed, players agents would negotiate improved contracts for their clients to ensure the extra money was swallowed up by higher wages.

Premier League owners managed to reduce the prune juice effect by introducing Short Term Cost Control (STCC) rules, which meant that the wage bill could only be initially increased by £4 million a year, unless the club also managed to increase its non-TV income.

The impact on Stoke shows how successful STCC has been, as the club has gone from losing over £30 million in 2012/13 to making a small profit in subsequent years.

Summary

Stoke have a solid financial base, but are still reliant on the Coates family, via Bet365, and are presently owed over £60 million, interest free, by the club.

It’s difficult to know where the club go next. 9th in the Premier League was about as much as they could realistically hope for, although there is always the allure of a decent cup run.

Provided fans are happy with this situation then the club can carry on in their present role, ruffling the feathers of some of the ‘Big 6’ who don’t fancy playing in front of a hostile local crowd, hopefully a cup run as a distraction now and then…and that’s it. So long as this is acceptable then the club has potentially a decent stay of execution in the Premier League.

Five year summary

Below are all the numbers from the analysis. Apologies for any mistakes!

Manchester City: Some girls are bigger than others

Introduction

No trophies, third in the league, and the costs of embedding a new managerial regime may have had some thinking City would struggle financially in 2016/17

The headline figures are mixed, income is up significantly, profit before interest down 80%, but the club claims to have no debt and is self sufficient.

Direct comparatives with the previous year’s profit and loss account figures are slightly distorted by City having a 13 month period of account for 2016/17, so bear this in mind when looking at growth compared to 2015/16. There’s nothing sinister in our opinion in changing the year end to 30 June.

Income

Clubs have three sources of income.

Matchday

Matchday income at City fell slightly, mainly due to a relatively early knockout in the Champions League. The expansion of the Etihad in recent years has allowed City to generate £50m plus a season from matchdays, but this is still way behind United (£111m) and Arsenal (£100m).

City have always priced their tickets towards the lower end of the market, which is great for fans. Initiatives such as the ‘Tunnel Club’, where (presumably corporate) fans get to sit behind the dugout and see the players in the tunnel pre and post match show that City are trying to extract more from the prawn sandwich brigade.

Matchday income was only 11% of City’s total revenues. You would perhaps expect this from a small club in the Premier League such as Crystal Palace, but it does seem low for a behemoth such as City. United had 19% of income and Arsenal 24% from this source.

Broadcasting

Broadcasting income was up 26% and tops £200m for the first time. This is mainly due to the impact of the new domestic TV deal with BT/Sky. UEFA TV monies actually fell by £13m due to City being knocked out of the last 16 round of the Champions League compared to the semi-final the previous year.

Compared to their closest rivals who have reported to date, at £204m City are slightly ahead of both United (£194m) and Arsenal (£199m)

Any growth in TV income in 2017/18 will be dependent upon City’s progress in the Champions League, as the domestic deal runs for three seasons. Even if City win the Premier League they will only receive about an extra £4m in terms of merit payments.

Commercial

Commercial income at City normally causes Arsene Wenger, an intelligent man who is nonetheless known for whining at events at the Etihad both on and off the field, to start muttering ‘Financial Doping’ as his handlers reach for the smelling salts.

This income source rose over 22% to £218 million. The reason why eyebrows are raised in relation to City in this regard is the club’s commercial links with related parties to the Abu Dhabi owners.

City’s critics accuse the club of negotiating deals at above market rates, overinflating income and therefore allowing the club to pay more for wages and transfers whilst complying with Financial Fair Play (FFP) regulations.

City have fallen foul of FFP issues in the past, but we suspect they have been very careful to adhere to the rules in the present climate of UEFA inspectors.

Can clubs manipulate their finance to comply with the rules? The answer in our opinion is an unequivocal yes, but that is the subject of a separate blog post. Are City guilty of such behaviour? We have no idea, but expect City to not be subject to any UEFA sanctions (the Premier League’s own FFP rules are much easier to satisfy than those of UEFA).

City’s commercial income is still some way behind that of United (£275.5m) but United are in a league of their own when it comes to global appeal, and their commercial department negotiates deals accordingly.

City are way ahead of Arsenal (£125.4m) in this income source, which is perhaps a testament to Arsenal’s inconsistent appeal to sponsors and their commercial department’s rather disappointing performance.

Costs

The main costs for a club are player wages and player amortisation (transfer fee costs spread over the life of the contract).

City’s wage costs, which had been under relative control for three seasons, rose over a third to £264.1 million. This compares to United (£263.5m) and Arsenal (£199.4m). When Sheik Mansour acquired City, the club had to play over the odds in wages to attract high quality players, as Champions League appearances were not in the offing. This explains why wages were so high in 2013.

Clearly recruiting Pep Guardiola and his team, new signings and improved contracts for some squad members came at a cost.

Despite the increase in wages, City’s wage expense as a proportion of total income, which has risen in the year, is a healthy 56%, although notably higher than United (45%) and Arsenal (47%).

Amortisation charges are up nearly 30% to £121.7 million.

‘Other’ costs rose 23% to £104.3 million. It’s not clear what has driven such an increase.

One thing that may have Arsene Wenger once again being only allowed to eat with a spoon is directors’ pay. This is in the City accounts at a zero figure.

City’s parent company, City Football Group Limited, (which is not subject to FFP as such, and has not yet published its results) had ‘key management compensation’ (presumably director pay) of £4.4 million in 2015/16. Such behaviour prompts City’s critics to accuse the club of transferring some costs to other outposts of the City group empire to ensure the club of complying with FFP.

Whilst City have no direct bank debt, they do show an interest cost in relation to the Etihad stadium. Whilst not wanting to bore you with accounting dullardness, because the Etihad is rented on a 250 year lease, which is effectively its useful life, the stadium is treated as being an asset of the club, funded by a loan from the council.

Offset against the above costs is gains on profit sales of £34.6 million (see below for more detail).

Profit

Profit is an abstract concept, in theory it should simply be income less costs. In practice there are a range of profits quoted, depending on which costs are included.

City are quoting a profit of £1.1 million for the year. This is however after taking into account gains on player disposals. Whilst we expect to see clubs making a profit on player sales each year due to the way player signings are treated in the accounts, this figure is volatile as it depends on individual player disposals.

Excluding player disposals, City’s EBIT (which is ‘recurring’ profit before interest and tax) was a loss of £30.2million, compared to a profit of £2.8m the previous season.

Adding back the non-cash expenses in the form of depreciation and amortisation gives an EBITDA profit of £105 million, which is very close to the previous year’s £109m. United made an EBITDA profit of £200m and Arsenal £145m, reflecting City’s relative generosity in terms of wages compared to the two other clubs.

City had a negative tax expense in 2016/17.

Player activity

City spent £203.5 million on the likes of Stones, Jesus, Gundogan and Sane in 2016/17 (what about Nolito and Claudio Bravo some of you will of course also cry? We’ve not mentioned them as they are, in the words of former Manchester legend Frank Sidebottom, a bit bobbins, and we don’t want to embarrass Pep, especially as my wife fancies him).

If these players are each on five year contracts then this gives an extra amortisation cost of £40.6 million (£203.5/5), which ties into the cost analysis above.

In terms of disposals, City sold players for £51 million, to give a net spend for 2016/17 of £153m.

Hidden in the footnotes to the City accounts are a couple of interesting figures (interesting only to those who are still reading this tedious summary we suspect). The first is contingent liabilities. This is the sum City have to pay to players and former clubs if certain achievements (appearances, trophies, international caps etc.) are met. This is £111 million at the end of June 2017.

City had a spending spree in Summer 2017, mainly on signing Mendy, Walker, Bernardo Silva, Ederson and Danilo. A number of players left the club too, but the accounts reveal a net spend of £161 million in the window.

Summary

City’s owners are not motivated by making profits, so the breakeven in the year is more to do with keeping the beancounters at UEFA happy more than bringing a smile to face of Sheik Mansour.

Their business model in relation to being part of a group with tentacles in many clubs across the globe will fuel idle gossip and accusations from the club’s detractors.

For those who think that all this financial analysis is a load of old cobblers, there’s a case for saying, just watch the football, which is possibly the best seen in the Premier League since its inception (although of course no trophies are won in November).

Financial Summary

Key figures from the accounts shown below

 

Hull City 2017: Marooned in Flamingoland

Introduction
They came, they saw, they went back to the Championship. If ever a club in recent years deserves the ‘Yo-Yo’ label, it is Hull City. In the ten seasons commencing 2007-8 the club has been promoted and relegated three times.

Hull were promoted via the playoffs in May 2016, but spent the summer in limbo, with a clear conflict between the owner Assem Allam and manager Steve Bruce, presumably over recruitment.

Mike Phelan took over as caretaker, and on the back of a victories in the first two matches the club made the decision to appoint him as manager on a full-time basis.

It’s doubtful whether any other £100 million a year business would make decisions on the fly in such a manner. Somewhat predictably, Hull’s season went into a nosedive, and they had one win in the next 18 matches, leading to Phelan being sacked.
Hull spent £32 million in the transfer market, mainly on cast offs from other Premier League clubs (Ryan Mason, Will Keane, James Weir), loanees and unheard of foreign signings.

Hull’s relatively conservative transfer policy has resulted in some more established Premier League clubs questioning the distribution of broadcasting revenues and parachute payments to relegated clubs.

Whilst Hull didn’t lose many of the players during the summer window, by the time January arrived the vultures were picking over the relatively few bones left, with top scorer Robert Snodgrass and Jake Livermore jumped ship for West Ham and West Brom respectively in £10 million plus deals.

New manager Marco Silva managed to improve results compared to Phelan, taking the club out of the relegation zone, but defeats to already relegated Sunderland, and fellow strugglers small London club Crystal Palace, sent Hull down.

Silva left for Watford, and Hull’s manager became the splendidly named Leonid Slutsky, who we think used to play Spock in the original Star Trek.
Income


Hull’s figures in recent years highlight the impact that promotion to the Premier League can make. In 2012/13 the club’s total income was £17 million, of which £5.9 million was their final parachute payment after being relegated from the Premier League in 2010.

Income for 2016/17 was nearly £117 million, due to the popularity of the Premier League with broadcasters. A new three-year TV deal with Sky and BT commencing in 2016/17 along with recently boosted overseas rights. Hull’s TV income, despite relegation, was £94 million, or 80% of total revenue. All clubs in the Premier League benefited by on average £35 million due to the new deal.

Because Hull were relegated immediately after being promoted in 2016/17, they will only receive parachute payments for two seasons.

Gate receipts were marginally up in 2016/17, 10% to £7.9 million, but other match day income, presumably corporate boxes and perhaps perimeter advertising (clubs are notoriously vague as to what appears in individual headings) quadrupled from £2 to £8 million.

‘Other’ income, which includes commercial and retail, benefited from Hull’s promotion too. The sad thing in relation to this is that Hull ditched our favourite shirt sponsors, Flamingoland, home of the Mumbo Jumbo extreme ride, for a generic betting organisation.

Costs

As always the biggest outlay for a professional club is in relation to players. Hull’s wage bill more than doubled to £61 million, partly due to signings, but also due to pay rises for the existing squad.

Hull are only the third Premier League club to publish their results, so it’s not possible to directly compare with their peers, but it would have been bottom three compared to the Premier League the previous season.

Given the increase in income due to the TV deal mentioned above, we would expect wages to rise for most clubs. Premier League club owners have tried to restrict all of this money ended up in players’ wage packets via the pompously named Short Term Cost Control (STCC rules), which restrict the increased amount spent on wages to £7 million PLUS any extra non-TV money earned by the club.

Whilst wanting to appear noble, the aim of STCC is to increase the profits for the owners of clubs, by restricting the amount that goes to players.

The other main player cost is player registration amortisation. Whilst this is a non-cash expense, it is linked to the amount Hull have paid in respect of transfers, spread over the contract life period. At £32.6 million, it is a sizeable sum, but will fall in 2017/18 as Hull have offloaded some players.
Combining the two player costs shows that Hull have struggled in the Championship to deal with the demands of the division.

On the plus side in 2013 and 2016, when Hull were in the Championship and total player costs exceeded income, the club was promoted both times. These figures therefore include promotion bonuses (£10.4m in 2016, not disclosed in 2013).

One other cost that is noticeable in Hull’s books is the interest expense. The vast majority of Hull’s loans are due to the owner and/or Allamhouse Ltd, a company owned by the owner.


The interest rate on the loans, calculated very crudely by us, is not particularly high, and likely to be much lower than that charged by a bank.

Profits
Profit represents total income less the costs of running the club. The profits after tax belong to the owners, and can either be reinvested into the club or paid out in the form of dividends (very rare though, except for Manchester United) .

Hull are a perfect example of why English clubs in the Premier League are attractive to owners. In that division they make a lot of profit for owners, as well as being high profile outfits that are seen globally by TV viewers.

There are a variety of profits that tend to be analysed.
Profit before tax is as it says on the tin.

Operating profit is income less all costs except tax and finance costs.

EBIT is the same as operating profit, adjusted for non-recurring items such as gains on player sales (which, whilst arising each year, tend to be volatile and unpredictable) and legal claims.

EBITDA is the same as EBIT but has the non-cash expenses of depreciation and amortisation added back. This is a proxy for the sustainable ‘cash’ profit made by the club.

Hull’s figures show the price to be paid for playing in the Championship, as well as the rewards of the Premier League. Promotion in 2016 resulted in a boost of over £55 million to Hull’s profit before tax, with the other metrics improving too. Over the five year period of the analysis the club made a profit of just over £10 million. Nothing too excessive, but still enough for a good Saturday night out in Hull city centre.
Conclusion
Hull banked a lot of money in 2016/17 from their one season in the Premier League. As well as selling their crown jewels in the January 2017 window, the remaining good players in the shape of Harry Maguire, Tom Huddleston, Sam Clucas and Andrew Robertson departed in summer 2017. This could be part of a strategy to streamline the wage bill.

Their replacements have not fared well, and Hull are presently hovering near the relegation zone in the increasingly cut throat Championship. The only positive from this is that is Hull continue to perform poorly we could see a return of Flamingoland as the shirt sponsor.

One area of possible concern is the relationship between the club and its owner. Since failing to get the football authorities to change the club name to Hull City Tigers,  Assem Allam has been throwing his toys out of the pram with a series of Trump like inflammatory statements.

In the last year, Hull have increased, then decreased, the number of shares that they have in issue. Whether this was due to a potential sale or part sale of the club is uncertain, but Hull are best filed under ‘watch this space’ in terms of ownership for the foreseeable future.

Norwich City 2017 Financial Results: Up the Down Escalator

Introduction

It’s difficult to dislike Norwich (unless you’re an Ipswich fan). Old fashioned provincial stadium, once beat Bayern Munich, bit of a yo-yo existence, owner gets a bit lively after a few red wines, nothing brash or flash about them.

Their financials are broadly the same, live within their means, sensible transfer policy, most matches sold out at home.

Norwich were relegated at the end of 2015/16, but were among the bookies favourites to be promoted back to the Premier League the following season.

Their board appeared to back the manager Alex Neill in the transfer market, and they spent £19.9 million in the transfer market signing Alex Pritchard (pantomime villain on the South Coast after agreeing to sign for Brighton and then Norwich gazumping the wages offered whilst he was on the M25), Wildschut, Oliveria and Canos. Whilst a few players left the nucleus of the squad stayed with the club.

A good start to the season meant the Canaries were top of the table after 12 games, and those who had backed the club at the start of the season were getting excited. The wheels then fell off, only two wins in the next 12 games, and they eventually finished outside of the playoffs in 8th position. Manager Alex Neil paid the price for not bringing the club the success that was anticipated by losing his job.

Income

The financial results show that relegation has hit the club, but not disastrously. Total income is down 23%, nearly all of this is due to Premier League TV money of £70.2 million in 2015/16 being replaced by parachute payments of £50.5 million. Parachute Payments broadcast income accounted for 67% of total income for Norwich last season, compared to 72% in the Premier League in 2015/16.

These parachute payments will fall in 2017/18 by about a further £10 million. It is however in 2018/19 that the real impact would be felt should Norwich remain in the Championship. The club is only entitled to two years of parachute payments as they were relegated the first season after being promoted. This would mean that broadcasting income would then fall

Gate receipts were down 20%, although average attendances were hardly affected by the drop. The fall may be due to the club being unable to charge the same level of prices to corporate fans, who are less excited by Burton Albion than Chelsea.

Norwich did manage to sell some players during the season, and generated a profit of £11.9m on total player sales income of £18.4m, mainly from the sales of Robbie Brady, Martin Olsson and Nathan Redmond. This helps to reduce losses for the season, but may have impacted upon success on the pitch too.

Costs

Like all clubs, Norwich’s main outlay is in the form of players. Wage costs are one expense, and Norwich, despite apparently having relegation clauses in contracts, still had a total wage expense of £55.1 million. This is the second highest Championship wage bill ever published (although I anticipate Newcastle and Villa may trump these totals when their results are published in due course over the next few months). It’s clear that the board backed the manager in keeping onto the bulk of the squad rather than cashing in, but this was not reflected in results.

The wage/income ratio at 73% is only marginally higher than the previous season in the Premier League at 69%. The ratio was very high in 2014/15 (96%) due to Norwich being promoted to the Premier League and having to pay promotions bonuses, which most boards of directors classify as a ‘nice problem’.

Compared to other clubs in the division, whilst Norwich’s wages look high (the average for the Championship in 2016 was (£23.1 million), the wage/income relationship is far lower than the Championship average of 101% in 2016. This is because many clubs in this division do not have any parachute payments, and so their income is far lower (average of £22.9m in 2016).

Norwich made total payments of £4.3milion for severance. This includes Alex Neil (rumoured to be £2 million) and chief executive Ged Moxey, recruited from Wolves in August 2016, who only lasted until February 2017. He managed to earn during that period £417,000 plus a payoff of £712,000. The reasons behind his departure were never made clear, although rumours of boardroom bust-ups suggest that all was not harmony and light between Moxey, Delia Smith and Ed Balls. Perhaps he criticised Ed Balls’ performance on Strictly, or didn’t like one of Delia’s flans, but, whilst out of work, he won’t be needed to sell the Big Issue just yet after trousering nearly £6,500 a day whilst at Carrow Road.

Norwich do have a history of paying their chief executives well. In previous years some CEO’s have taken home over a million pounds. Moxey would not have quite reached these levels if his pay was pro-rated, but even still it is a considerable sum.

The other cost in the profit and loss account relating to players is that of player amortisation. Whilst here we are straying into accounting nerd territory, amortisation is how clubs account for player signings, by spreading the transfer fee over the length of the contract signed by the player.

For example, if Norwich paid £8 million for Alex Pritchard (and I suspect the actual fee was far lower than this, unless Norwich are promoted), and he signed a four-year contract, then there would be a £2 million annual amortisation charge in the profit and loss account in each of the next four years.

Amortisation is useful because it helps to remove some volatility from player costs, as it spreads the cost over the seasons the player is due to perform for the club.

Norwich’s amortisation charge was £16.5 million, down from £22.4 million the previous season in the Premier League, but still markedly higher than the Championship average of £4.5 million in 2016.

This high amortisation fighure reinforces the view that the club had a strategy of keeping the squad together to try and bounce back into the Premier League.

If we add together the wages and amortisation totals, and compare to income, Norwich’s profitability looks more precarious.

The above shows that for every £100 coming into the club, £95 was being expensed in the form of wages and amortisation.

This is high for all clubs (the Championship average was 120%) but if the club is not promoted this season, then the ratio will rocket due to the lack of parachute payments.

The alternatives available to Norwich would be to either seriously prune back the squad by selling the best (and highest paid) players, or borrow money from either the board or a bank.

A wage bill of £55 million and high amortisation figure could also potentially cause some financial fair play (FFP) issues, although this is now based on a three-year rolling loss total, so Norwich’s relatively good results in 2016/17 will be of benefit.

Profits

Profits are income less costs, so taking the above totals into consideration, Norwich made an overall post tax loss of £2.7 million in 2016/17. It’s not pleasant losing £53,000 a week, but if you strip out the severance costs of £4.3 million, which are (hopefully) not going to recur every year, then the club made a small profit.

Because the club has relatively little debt (no loans and an overdraft of ‘only’ £1.8 million, interest charges were quite low.

The Championship is a bearpit of a division in terms of loss making. In 2016 Championship clubs had total non-recurring losses of £361 million, so Norwich is far stronger on a relative basis to nearly all other clubs.

Liabilities

As mentioned above, Norwich’s debts to lenders appear easily manageable. Delia Smith’s loans have been repaid, they have other borrowings.

The main sums that are payable are in respect of transfers due to other clubs. This is over £18 million at 30 June 2017, of which £15 million must be paid within a year. To counterbalance this the club is owed £7.3 million from other clubs at 30 June 2017.

The small print

In the footnotes to the accounts are a couple of interesting additional pieces of information. Norwich potentially might have to pay out up to £23.7 million if conditions included in transfer and player contracts are fulfilled. This is likely to be linked to promotion.  A further £3 million of loyalty payments could be due too. I’m sure the board would again like to file these as ‘nice problems’ and welcome them, as they are likely to coincide with a return to the Premier League.

The final footnote to the accounts shows that in the summer 2017 transfer window Norwich signed players for £8.8 million (which could rise to £11.3 million) and had player sales (Jacob Murphy, Johnny Howson etc.) of £16.9 million (rising to £19.6 million).

Conclusion

Norwich seem on paper well positioned to compete financially with other clubs in the Championship in 2017/18. One of the problems in the Championship is that many owners take a short-term gamble with clubs, spending large sums of money with no guarantee of success, and then facing a financial hangover if it does not bear fruit.

The Norwich board do not seem to be taking such an approach, which is to be applauded. The danger is that by doing so, they could end up as a very well run Championship club for a long period of time, and that isn’t necessarily any fun, just ask fans of Ipswich Town.