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.

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 19^th 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.