Huddersfield Town: The Model

Must confess to having a huge soft spot for Yorkshire’s leading football club, Huddersfield Town. The locals are friendly, one of their fans runs the funniest football website on t’internet in http://www.htfc-world.com/ , they sell any remaining pies and burgers for £1 at the end of matches to fans, the club is owned by a local lad who clearly loves his club (and isn’t a Billy Bigbollocks), they are not managed by Neil Warnock AND they were promoted last season on merit, relatively under the radar. Did they achieve promotion last season on a shoestring or is that a Yorkshire myth? Let’s look…

Summary of key figures (Huddersfield Town Association Football Club Limited

Income £15.8 million (up 40%)

Broadcasting income £7.5 million (up 54%)

Wages £16.5 million (up 32%)

Loss before player sales £9.0 million (up 7%)

Player purchases £6.6 million

Player sales £1.3 million

Borrowings £53.1 million (Thanks to Uncle Dean!)

Final Position: Promoted via the playoffs to the Premier League.

Income

In the Championship there is effectively two divisions, effectively split between those clubs that do and do not receive parachute payments.

Huddersfield’s overall income was in the bottom quarter of Championship teams in 2016/17. Talk to a Yorkshireman, and they will tell you it’s not about spending money, but spending it wisely that matters, and the Terriers are a textbook example of how to do just that.

The above tables shows the income of all Championship clubs apart from  Newcastle (surely Mike Ashley has nothing to hide?) for 2016/17.

Additionally Barnsley are a pain in the butt as they used a legal loophole to avoid showing their profit and loss account (although they did make a profit of over £10 million last season, mainly due to the sell on clause when John Stones was sold by Everton to Manchester City).

Most clubs are showing higher income than in the previous season. The average income of the 22 clubs that have reported to date is £28.6 million. This compares to an average of £22.9 million the previous season.

Huddersfield therefore were promoted despite earning just over half of the average income for a club in the division, which is an incredible achievement.

The main reason for the increase in overall income in the Championship is due to a combination of higher parachute payments, a new TV deal in the Premier League, which drips down to the Championship in what are called ‘Solidarity Payments and having ‘big’ clubs in the shape of Newcastle and Villa relegated from the Premier League.

Championship clubs earn about £4.3 million a year from solidarity payments, plus their earnings from the Football League TV deal which are worth a minimum of a further £2 million. Championship clubs also pick up £100,000 for each home game broadcast on Sky, and £10,000 for each away game.

The English Football League (EFL) negotiated a flat percentage of all future TV deals with the Premier League (PL) a couple of years ago. This at the time seemed to be a great deal, but subsequently the PL sold its domestic rights for 10% less in 2019-22 than the current three-year arrangement generates.

Like all clubs Huddersfield earn their income from three sources, matchday, broadcasting and commercial/sponsorship.

Huddersfield therefore had the fourth lowest (probably the fifth if the miserable sods at Barnsley had the decency to show the figures) matchday income total in the division, but still managed to be promoted. Which shows that size doesn’t’ necessarily matter, it’s what you do with it that counts (something I’ve been trying to persuade my slightly disappointed wife to buy into for years).

Despite a playoff match at home and a Wembley appearance, there was no change to Town’s matchday income for the season. This was due to a combination of low ticket prices which contributed to average attendances rising to over 20,000, and the club keeping with the tradition of giving their share of the Wembley receipts to the losing playoff team, in this case the division’s dullest club Reading. This also explains why Reading’s matchday income increased by 86% in 2016/17.

The decision by chairman Dean Hoyle to cut ticket prices meant that the club only generated £155 per fan for the season, or £6.73 per match.

Hoyle’s benevolence contrasts with clubs such as Spurs, who next season will be charging a minimum price for a season ticket of £799 and an average price of about £1051 to watch the club at the ‘new’ White Hart Lane.

Town’s broadcast income was up 41% to £7.9 million. The baseline figure for clubs in the Championship is about £6.3 million, plus an additional £100,000 for every home, and £10,000 for every away game that is broadcast live on Sky. A combination of some local derby games, making the playoffs and attractive football meant that Huddersfield were popular with Sky in 2016/17

The impact of parachute payments for the top six clubs in the chart is very evident. Recently relegated Norwich earned £6.80 from broadcasting for every pound earned by Huddersfield.

Huddersfield’s commercial income rose by an impressive 57% to £5.2 million. The combination of higher matchday attendances and the club’s high league position helped when negotiating deals with commercial partners.

Costs

The main costs at a football club are player related, wages and transfer fee amortisation (accounting nerd alert!).

After years of relative caution, wages increased by over 30% in 2016/17. This was due to a combination of better players on better contracts, as well as having to pay win bonuses more regularly than in prior years.

The club’s basic wage bill was one of the lowest in the division.

On top of the wage bill shown above, the club also paid out £11.9 million in ‘promotion costs’ at the end of the season. Most of this cost will be bonuses (thoroughly deserved in our view) to David Wagner and his squad for the trememdous achievement in reaching the ‘promised land’ ( © All Lazy Journalists and Radio Five Live professional twat Alan Green).

Whilst Town’s basic wage bill is low by Championship standards (the average was £26.4 million in 2016/17), they still managed to pay out £104 in wages for every £100 of income during the season, and have had wages bills that exceeded income for many years.

If we factor in promotion bonuses too, then the club paid out £180 in wages for every £100 of income in 2016/17, a price all Town fans will no doubt will say was worth paying (especially as it was Dean Hoyle who paid it, the club paid out £899 in wages (including promotion bonuses) for every £100 of matchday income, or to put it another way, for every £1 in wages, the fans paid 11 pence directly).

Amortisation (skip this bit unless you want a quick and dirty accounting lecture) is how clubs deal with transfer fees in the profit and loss account. When a player signs for a club the transfer fee is spread over the life of the contract.

Therefore, when Huddersfield signed Christopher Schindler, the German defender with the speech impediment in 2016 for a then record £1.8 million on a three year contract the amortisation charge was £600,000 a year for three years (£1.8m/3). Whilst not a huge fee by divisional standards he did help lift Town to the Premier League (you’re fired…Ed).

The amortisation fee in the profit and loss account includes all players who have been signed for a fee (assuming they are still in their initial contract).

Huddersfield’s total amortisation charge rise significantly in 2016/17 but was still one of the lowest in the division. This is partially due to the club’s excellent recruitment of loan players in the shape of Aaron Mooy and Izzy Brown, further evidence of being sensible with money instead of just spunking it away spending it for the sake of it, such as in the case of Aston Villa who spent over £80 million on players in 2016/17 and had a subsequent amortisation charge of nearly £24 million.

If the amortisation costs are added to wages, then total player costs (including bonuses) for Huddersfield in 2016/17 were £196 for every £100 of income. This shows that the cost of promotion is ridiculously high (it cost fellow promoted club Brighton £160 in player costs for every £100 of income) to get into the Premier League.

The other major cost for Town is that of the stadium. This is linked to the number of games paid and fans attending. In 2016/17 this was £875,000. The club are tenants until at least 2043, which is nearly a quarter to nine in old money.

Profits and losses

Profits (or more commonly for non-Premier League football clubs losses) are income less costs. The bad news for Huddersfield is that the club lost a lot of money last season from day to day trading.

The good news is that they were promoted, so who cares?

Operating losses are income less the running costs of the club (wages, maintenance, insurance, amortisation etc. and they are before deducting interest and promotion costs and player sale profits. In 2016/17 this worked out as £9 million, or £172,000 a week. This is 7% more than the previous season.

Selling players helps to cushion these losses, but there is no guarantee that this will take place on a regular basis.

The above chart shows that Town did well in 2013 in selling Jordan ‘Where’s the nearest branch of Greggs’ Rhodes to Blackburn in 2013 and Jacob Butterfield to Derby in 2016.

Under FFP rules, Championship clubs can make a maximum FFP loss of £39 million over three years in the Championship. Huddersfield have a pre-tax loss of just £28 million over the three-year period.

Additionally, some costs, such as promotion bonuses, infrastructure, academy and community schemes, are excluded from the FFP calculations. Huddersfield had a category two academy, which costs about £1.5 million a year to run according to our sources, so this, combined with other allowable costs and player sales, means that Huddersfield were well within the FFP limit for the three years ending June 2017.

Under Premier League FFP rules a club can lose £105 million over three years and still be within the limits. The good news for Town is it looks increasingly that they’ll be in the Premier League for at least two of those seasons.

Player trading

The accountants treat player trading in a weird way in the financials. We’ve already shown that when a player is signed, his transfer fee is spread over the life of the contract. When the player is sold, the profit is shown immediately, and it based on the player’s accounting value, not the original transfer fee.

This creates erratic and volatile figures in the profit and loss account.

If we instead focus on the actual purchase and sales, the following arises

The above table shows that over the last five years Huddersfield have bought players for £15.7 million and generated sales of £19.8 million, a net income of £4.1 million over the period.

This allows Town fans to say one word to those who claim that you have to buy your way out of the Championship with player signings and high wages, and that one word is ‘bollocks’.

When you look at spending in the Championship in 2016/17, total spending was £356 million, and some clubs spent ten times as much as Town and did bog all apart from provide chuckles in relation to Ross McCormack, Aston Villa’s £12 million signing from Fulham, missing training because the fat fuck couldn’t be arsed his security gates wouldn’t work at his swanky new home in the Midlands.

Debts to and from the club

Town don’t show how much is owed in respect of player transfers, which is a shame. The club are owed £6.3 million, of which £2.5 million is for deferred tax (don’t ask), so there’s not a lot left for sums owing in relation to players.

Short terms creditors increased from £48 million to £75 million. The majority of this is owed to Dean Hoyle, who has lent the club nearly £53 million interest free, which qualifies him for ‘very nice man’ status in West Yorkshire, which is about as high as praise ever gets.

In addition, there’s a sum of £16 million for ‘other creditors’ which we suspect is in respect of player transfers such as Tom Ince. Huddersfield were quick out of the blocks in the summer 2017 and owed money for signings very early in the transfer window.

Summary

Huddersfield have shown that a club can beat the big spenders in the division in terms of players transfers and wages. In doing so they give hope to others in a similar position compared to the wealthy in the Championship. The promise of £100 million a year in broadcast income causes some club owners to lose touch with reality in terms of trying to buy their way to the (ahem) Promised Land.

At the same time, they have been subsidised by the owner in recent years as the income generated hasn’t been enough to even pay the wages over the last five seasons, which highlights the impossible task of trying to achieve promotion whilst breaking even

Their biggest strength is also their biggest weakness. Dean Hoyle has put over £50 million into the club, and whilst Town won’t need his further support whilst in the Premier League, if they ever returned to the lower divisions we suspect they would struggle financially once parachute payments ran out. Provided nothing happens to DH there’s no problem, but if any Town fans see him about to cross the road, get out of the car and stop traffic until he’s reached the other side, you don’t want anything happening to him.

Data Set