Millwall financial results 2017: Our House

Introduction:

I like Millwall for many reasons. I was born in Southwark, so they were the nearest club to me as a kid. My Uncle Tom had trials for them in the early 50’s. My Uncle Terry, who taught me how to play football, love the game and hate Crystal Palace, supported them for over 60 years. Add to that the Danny Baker factor (and ignoring that Rod Liddle is a CJTC) and there’s a lot of positives.

2016/17 was a successful year in League One, with the club returning to the Championship via the playoffs, and there was some success in the FA Cup too, reaching the quarter final stage.

Off the pitch things were not so good. Lewisham council’s behaviour in trying to arrange a compulsory purchase order for land occupied by the club led to accusations of skulduggery and whitewash by fans.

https://www.standard.co.uk/sport/football/millwall-shock-as-inquiry-clears-lewisham-council-of-wrongdoing-over-plans-to-seize-den-land-a3703911.html

At present there’s no guarantee about where the club will be playing its fixtures in the medium term if the land is sold to property developers.

Key financial figures for 2016/17:

Income £10.0 million (up 20.5%).

Wages £9.4 million (up 17.3%)

Losses before player sales £5.5 million (down 5.5%)

Player signings £923,000

Player sales £514,000

Debts £18.1 million (no major change)

Millwall’s set up is tricky to follow. Millwall Football Club Limited are owned by Millwall Holdings plc, who are owned by Chestnut Hill Ventures (CHV) LLC, based in the USA.

CHV is controlled by American businessman John Berylson, who sued Steve ‘Shagger’ Norris successfully for libel last year in relation to Millwall related issues, and therefore, for the benefit of any doubt, we think that John Berylson is a very very nice man, who helps little old ladies cross the road, and likes puppies.

Income:

All clubs generate money from three sources, matchday, broadcasting and commercial. Being stuck in League One for the last two seasons has had a detrimental impact on Millwall’s finances.

Matchday income rose by just over 20%, reflecting Millwall’s success in reaching Wembley for the playoff final, as well as a lucrative FA Cup match against Spurs. We would expect matchday income to at least hold steady in 2017/18 due to the number of clubs in the Championship with large away followings.

Relegation from the Championship in 2015 significantly reduced Millwall’s broadcasting income.

In terms of boradcasting income, EFL clubs generate cash from two sources.

‘Solidarity’ payments from the Premier League (EPL) are from the £5.1 billion domestic TV deal with BT and Sky. This is given as a fixed percentage of the deal, and works out as about £645,000 for each League 1 club. Promotion to the Championship will result in a significant increase to Millwall of £4.3 million for 2017/18.

In addition, the EFL has its own TV deal with Sky, but this generates only £88 million per season to be split between the 72 EFL clubs, skewed towards clubs in the Championship. This will also benefit Millwall in 2017/18.

If matches are broadcast live, Millwall will earn £100,000 for each home game and £10,000 for every away game broadcast live on Sky. In a division featuring clubs such as Leeds, Villa, Sunderland, Wolves, Millwall are unlikely to be a first pick for the broadcasters unless they are playing one of the bigger clubs, who can generate decent TV ratings for Sky.

Millwall will have to compete with clubs who have been relegated from the EPL and receive parachute payments. These dwarf income from other sources.

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Other income, mainly commercial and retail, has been broadly constant over the last five years.

We anticipate that Millwall be towards the bottom of the income table for 2017/18 for Championship clubs, based on the latest figures we have for other clubs in the division.

Costs:

The main costs for a club are in relation to players, and come in the form of wages and player amortisation.

Wages rose by 17% to £9.4 million. The only other clubs we have figures for from League One last season to date are Sheffield United (promoted) at £10.0 million and Walsall at £3.4 million.

Relegation to League One in 2015 meant that Millwall had to slash the wage bill and offload players on well paid contracts.

This is because  Financial Fair Play operates as a wage cap in League One. Clubs can only pay out 60% of income in terms of playing staff wages (this cap ignores non-player wages).

It is possible for club owners to contribute here if they invest money into the club in the form of new shares, as these are added to the income figure. So, if a club owner invests £1 million into a League One club the playing staff wage budget can be increased by £600,000

The wage/income ratio for Millwall was the lowest for many years at 94%, or to put it in more simple terms, the club paid out £94 in wages for every £100 they generated from revenue. This of course leaves effectively nothing to pay for all the other overheads of the club, such as ground maintenance, heat and light, HR, finance and so on.

The above table also highlights how difficult was for Millwall the last time they were in the Championship, as the wage/income ratio was over 130%.

The Championship is a car crash of a division, with wages averaging 101% of income for 2015/16, despite so many clubs receiving large sums in the form of parachute payments.

We would expect Millwall’s wage bill to rise substantially in 2017/18, but to be still significantly less than those of clubs such as relegated Norwich, who paid out £55.1 million in 2016/17, and promoted Brighton, with £31.3 million plus a further £9 million in promotion bonuses.

We estimate that average wages in the Championship are about £12,000 a week, compared to £2,500 a week in League One. This means that Millwall were probably one of the big payers last season, but that will be reversed in 2017/18.

Millwall’s best hope for promotion is to strike lucky in terms of player recruitment in terms of signings and loan deals for relatively unknown players. The likes of Huddersfield, Wigan, Burnley and Blackpool over the last decade shows that this is achievable.

The other player related expense is that of player amortisation. This is the cost of signing a player spread over the length of his contract. This is how the club deals with player signings, and spreads the cost of a new player over the life of his contract.

So, if Millwall sign a player for £1 million on a four-year contract this works out as £250,000 amortisation a year for four years.

In League One, there are opportunities to sign players for relatively low sums. This is reflected in the amortisation charge being only £0.2 million in 2016/17. The average figure in the Championship is about £6 million.

The advantage of focussing on amortisation instead of just looking at transfer fees is that it removes some of the volatility from making one big signing in a single year.

We would expect the amortisation charge to continue at these levels at least for 2017/18.

Finance costs:

Millwall has debts of about £18 million, and interest is charged on these. Some of the debts are due to the owners at CHV.

The total interest cost was just over £1 million, or £20,000 a week. CHV charges interest at 12% per annum, but appears to have waived this for 2016/17 (and for many previous years too). The accounting for this is complex, and for the present CHV are keeping the club afloat.

Directors pay

Millwall have a moderate policy in relation to director pay compared to League One clubs, but low for the Championship. £164,000 compared to over £190,000 for both Sheffield United and Walsall. In the Championship seven clubs paid over £200,000, and some over a million.

Losses:

Losses are income less costs, and were £5.3 million last season, (£101,000 a week), before considering player sales, which reduced this figure by half a million.

Over the last five years Millwall have lost money each season. Total losses before player sales were £35.4 million, and the highest position during that period was 19th in the Championship.

Player sales reduced these losses by £1.5 million, but it is still a substantial level of commitment required from owner John Berylson (who remember, is a very, very nice man if his lawyers are reading this) to underwrite these losses.

Losses in the Championship are expected to total over £400 million last season. This is only sustainable if owners continue to fund clubs.

Player trading:

Millwall invested a reasonable amount by League One standards last season in pushing for promotion.

The club spent £923,000 on new signings, and sold others for £514,000. Promoted Sheffield United paid out £3.1 million, but fifteen clubs in League One spent less than £100,000 on player additions.

This season in the Championship Millwall be up against clubs with very large player budgets. Last season the relegated clubs splashed out their parachute payments on new players attempting to bounce back to the EPL with Aston Villa (£76 million) Newcastle (£57 million) and Norwich (£20 million) having varying success.

The Owner

John Berylson’s investment increased further in 2016/17 as he invested a further £3 million in the club via a new share issue.

This takes his total investment to just over £56 million, in the form of shares and loans.

Realistically, Berylson will have to subsidise the club by a minimum of £5 million a year for the foreseeable future, unless promotion to the Premier League is achieved. His biggest battle is going to be with the council, and their behaviour in relation to the New Den. Regardless of the team you support, this is one issue around which all fans should unite in campaigning for the club to stay at their present home.

It looks as if Berylson (very nice man) has put a further £4.3 million into the club in December 2017 too, according to documents lodged at Companies House.

Summary

Millwall are in a tricky position. They have the infrastructure to be successful in League One, but as a community club, the owner does not want to compete with some of the big spenders in the Championship, which is understandable.

Continued membership of the Championship is likely to be an expensive exercise, despite the additional income that generates, mainly due to the struggle to compete with higher wages.

The biggest battle awaits with the council, and it’s one match that is essential the club wins.

Brighton and Hove Albion. Please, please, please, let me get what I want

Brighton and Hove Albion: Please, please, please, let me get what I want.

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Introduction: Bigmouth strikes again

Let’s get the elephant out of the room. We’re both Brighton fans here at the Price of Football, so excuse us a little indulgence in relation to this following report. It won’t impact upon our objectivity though, and we won’t bore you with tales of how the club nearly went out of business after being left homeless in 1997.

This report will focus on the cost of Brighton being promoted to the Premier League in the six years since they’ve moved to the Amex stadium in 2011.

Key figures for 2016/17: Panic

Income £29.2m (up 18.3%).

Wages £31.3m* (up 11.0%) *excludes £9.1million bonus paid to staff upon promotion, would be a 42.9% increase if bonus included.

Losses before player sales £38.9 million (up 50.1%)

Player signings £19.0 million

Player sales £ 0.3 million

Tony Bloom investment £280 million

The Albion just missed out on promotion at the end of 2015/16, first on goal difference to Middlesbrough, and then via the playoffs following a match at Hillsborough in which four players limped off injured in the first hour.

Chairman and professional poker player Tony Bloom was therefore faced with a dilemma at the start of 2016/17. Sell some of their players who were being courted by other teams (Dale Stephens and newly promoted Burnley, Lewis Dunk and small Premier League outfit Crystal Palace, Antony Knockaert and just relegated Newcastle), or stick with them and go all in for one final promotion push.

He knew the latter would be a gamble, as if the club didn’t achieve promotion in 2016/17 it would have had to scale back its investment in the playing squad the following season to comply with financial fair play (FFP).

Bloom’s experience of when to go ‘all in’ worked, he backed Chris Hughton by turning down offers, investing in the squad, and was rewarded with promotion.

Income: Frankly, Mr Shankly

Total income for the season was £29.2 million. To put this in context, the three clubs relegated from the Premier League, Aston Villa, Newcastle and Norwich, each earned about £50 million in parachute payments. The sum is also four times the amount the Albion were generating when playing at the Withdean stadium prior to the move to the Amex in 2011.

Whilst we don’t have figures for most of the clubs for 2016/17, as the Albion are one of the first to announce their results, the table below, based on 2015/16 data, gives a rough indication of just how difficult it is to compete for those clubs without parachute payments.

Football clubs generate cash from three main sources, matchday, broadcasting and commercial.

Matchday income from ticket sales rose 14% to £10.7 million. This was due to attendances at the Amex increasing to 27,966 from 25,583.

Broadcasting income rose 48% to 8.1million. This was due to the ‘solidarity payment’ paid by the Premier League to the English Football League increasing from £2.3 million to £4.3 million as a result of a new domestic TV deal for 2016/19 secured by Sky and BT Sport. In addition, the club is estimated to earn £100,000 for each home game and £10,000 for every away game broadcast live on Sky. With the Albion being in the two top all season, they were regulars on television too.

Other income, mainly commercial and retail, rose by a modest 7%.

Promotion to the Premier League will have a major impact on those figures. Benchmarking against Stoke City, the only club of a similar size who have published their 2016/17 figures to date, we would anticipate matchday income to rise by about 10%, commercial/other income to double, and broadcasting income to be somewhere between £95-£120 million in 2017/18, depending upon how often the club appears on TV, and the final league position.

To get a rough idea of the increments involved, if a club appears on live TV more than ten times they get about £1 million for each additional appearance, and there is prize money for finishing in every position in the Premier League that increases by just under £2 million for each place up the table, so the difference between finishing 11th and 16th is therefore about £10 million.

Costs: Stop me if you think you’ve heard this one before

The main costs for a club are in relation to players, and come in the form of wages and player amortisation.

Wages in total rose by 43% to £40.3 million. Included in this figure is a £9.1 million promotion bonus paid to all 288 staff members, both playing and operational, by Tony Bloom. Excluding the bonus wages would have risen by a more modest, but still challenging 10.6%.

This means that wages (excluding bonuses) were 107% of income, or to put it in more simple terms, Brighton paid out £107 in wages for every £100 they generated from revenue.

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In the Championship as a whole, this puts the club at slightly more than average wage payers, compared to 101% for the division as a whole.

Whilst the increase in wages was substantial, it is still significantly less than those of relegated Norwich, who paid out £55.1 million in 2016/17.

This may explain why Alex Pritchard, who had apparently had agreed to sign for Brighton in summer 2016 for a then record fee of up to £8 million, mysteriously made a last-minute decision to sign for Norwich as he headed back up the motorway to his then host club Spurs.

Pritchard then took on the role of pantomime villain for the 2016/17 season in the eyes of many Brighton fans, for making exactly the same decision they would have made themselves under the circumstances.

The wages paid also perhaps put paid to the claims made by former manager Gus Poyet, who said the club had ‘hit the ceiling’ in terms of wages in 2013.

In recent years it has been an expensive business in terms of wages for clubs to fund promotion. Neither Newcastle nor Huddersfield have as yet published their accounts for 2016/17, so not possible to compare the Albion to the other promoted teams.

The other player related expense is that of player amortisation. This is the cost of signing a player spread over the length of his contract. Brighton broke their transfer record in summer 2016 in signing Shane Duffy from Blackburn, for a fee rumoured to be £3.5 million, on a four-year contract. This gives an annual amortisation charge of £875,000 (£3.5m/4).

The advantage of focussing on amortisation instead of just looking at transfer fees is that it removes some of the volatility from making one big signing in a single year.

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Albion’s amortisation increased significantly in 2011/12 with the then record signings on Will Hoskins, Will Buckley and Craig Mackail-Smith as the club was promoted and moved to the new stadium.

In then plateaued for the next three years before Tony Bloom backed Chris Hughton and sanctioned a modest increase in 2015/16, then making an extra commitment in the summer 2016 window.

Other costs: Well I wonder

The club has significant other costs operating from the Amex stadium. Land and buildings have a balance sheet value of £134 million. This includes £2.5 million spent during the year, which is probably in respect of property close to the training facilities at Lancing.

The stadium and other property costs are being written off over 50 years, but to this is added the costs of depreciating shorter life assets such as office equipment. This gives an overall depreciation charge of £4.4 million, down 10% on the previous year, but still higher than many other clubs in older stadia, constructed at a much lower cost. (Norwich’s was less than half that of the Albion, at £1.9 million, for example).

The Albion have a unique cost in terms of transport. Because of the sustainable transport policy that was a condition of planning permission being granted, the club has to contribute significantly to the local train and bus companies to provide free transport to and from home games. This cost is unknown but is estimated to be in the region of £2.5 million.

Director Pay: Barberism begins at home

One expense that will perhaps result in comment is the remuneration of chief executive Paul Barber, who joined the club over five years ago.

Barber’s pay more than doubled to over £1.2 million. Part of this was performance and bonus related, part of it was to prevent other clubs headhunting him. It was publicised in The Times that PB was on Liverpool’s radar when they were looking to replace Ian Ayre, their chief executive. Ayre’s package at Liverpool was…£1.2 million

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We’ve had some dealings with PB here at the Price of Football, and our view is he’s worth every penny. There can be few chief executives of what is now a £140 million a year business who will reply to every email they receive, and engage in fan debate to the degree that Barber has done during his time at the club.

Ultimately if Tony Bloom thinks Paul Barber is worth the money then that’s more than good enough for us. We don’t always agree with the decisions made, but then I don’t always agree with decisions made by my wife either, and still manage to think she’s wonderful.

For some reason PB generates a hysterical reaction from the Mavis Reilly element of the fanbase, who use any excuse to give him stick. We find such behaviour bewildering.

Losses: Hand in glove

Losses are income less costs, and were £38.9 million last season. This was an increase of £13 million from 2015/16. The losses were underwritten by Tony Bloom, to the tune to £107,000 a day.

Since moving to the Amex the Albion have racked up total losses of £118 million in trying to achieve promotion to the Premier League.

Some of you may by querying how the club has complies with financial fair play (FFP), which restricts losses to £39 million over three seasons, so it must average £13 million a season.

FFP is calculated using a different formula to the accounting losses, and some expenses, such as infrastructure, promotion, women’s and academy football, community schemes and so on are excluded.

Whilst the Albion don’t detail all of these costs, they have stated that they were FFP compliant in 2016/17. We’ve asked around some of our chums in football, and have calculated the following FFP loss for 2016/17.

The above suggests that the Albion were probably at their limit in terms of complying with the FFP rules in 2016/17, and would probably have had to make some player sales in 2017/18 in order to ensure they satisfied the three year figure of £39 million.

FFP in the Premier League is more relaxed, and of more concern to the club will be satisfying the wage control limits of STCC (Short term cost control) that only allow a Premier League club to increase the wage bill by £7 million a season, plus any rises in non-broadcast income

Player trading: Never had no one ever

According to the accounts the Albion paid out £19 million in 2016/17 on player additions.

On the face of it these seems much higher than the sums being quoted in the press, as the main signings were Shane Duffy (quoted at the time as going for a then record £3.5 million), Glenn Murray (£3 million), and Oliver Norwood, (£2m), although the club, as one would perhaps expect from a business owned by a professional poker player, keep their cards close to their chest and don’t disclose actual numbers.

We suspect the discrepancy is because many signings came with conditions in which extra fees kicked in should the Albion be promoted, and these payouts therefore became due at the end of 2016/17.

£19 million is a record sum for the Albion, more than double of any previous season, it’s a reasonably high figure for a Championship club, but not if compared to the amounts spent last season by clubs relegated from the Premier League in Aston Villa (£76 million) Newcastle (£57 million) and Norwich (£20 million).

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The club did appear to retrench in 2013 and 2014, partly due to tighter FFP rules, but as these were relaxed in 2015/16 spending has been modest, but perhaps more importantly, of mainly high quality. Previous years signings in the likes of Knockaert, Stephens, Murphy, Baldock, Hemed, Stockdale and so on can all be considered to be bargains.

Spending during the 2017 summer window has resulted in the club transfer record being broken three times. Most Premier League clubs do disclose in the accounts the amount spent (sometimes gross, sometimes net) in the window, in what is called the ‘post balance sheet events’ note, and we’re disappointed (actually probably just nosey) in that the Albion have not followed suit here.

The club have also spent £15.7 million in respect of buying land for development next to the training ground in Lancing. Once this is converted into retail and housing stock this could be a very useful additional source of income for the club. The hotel once proposed for the Amex site seems to presently be on the back burner.

The Owner: Handsome Devil

Tony Bloom’s total investment increased further in 2016/17 as he lent the club £28.2 million in the year. He underwrote the losses incurred, which was the equivalent of subsidising every ticket sold at the Amex in the Championship by £60 per match.

This takes his total investment to just over £280 million, in the form of shares and interest free loans. In addition to Bloom’s loans, the club also had racked up an overdraft of over £16 million by the end of May 2017, probably to pay out the staff bonuses as a result of promotion.

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Some fans are muttering about him selling out at a profit to a mythical Chinese or Middle Eastern investor. There’s no evidence to support this as (a) he’s a local lad (who just so happened to be a billionaire through his mathematical genius mind) who clearly loves the club, and travels to matches by train with the fans, and (b) he wouldn’t get his money back, as the club is worth less than the sum he invested.

Premier League status should allow him to stop having to subsidise the club as the extra monies of the Premier League should enable the club to break even (Stoke, for example, a club of similar size, made a profit of just £3 million in 2016/17).

Bloom remains the club’s biggest asset, as his devotion and decision making have proven to date have been exemplary. That also makes him the biggest risk, as if anything were to happen to him then the status of the club’s loans, for example, is unknown.

As a fan, all I can say is thank you Tony Bloom for bringing me some of the most memorable days of my life, and long many you continue to be in charge.