Football fortune and the challenges facing a League 2 club

Carlisle United decided to improve the depth and detail of their annual report and the result is a fascinating insight into the challenges facing a League 2 club. The current season is their fourth consecutive season in the division. They make 'Football Fortune' a central concept which is a way of talking about randomness as a factor in football outcomes on and off the pitch. It can play a bigger part in the life of a smaller club which does not have the resources and income streams of a larger club.

The report notes, 'The football industry continues to be highly uncertain, volatile and subject to random events. Professional football in League 2 has intense rivalry but with a generally evenly balanced competition'. There is a similarity in the size of clubs and their resources. 'This makes any additional funding available from unpredictable Football Fortune a key factor - cash from Cup success and player sales can make a big difference.'

'Beyond that, football success is heavily dependant on non-financial factors such as player recruitment, effective use of budget and player development, strategy and tactics. Since resources, wages paid and ability to attract players are broadly similar across many clubs in League 2, and the pool of player skills is also evenly spread, absolutely critical is football coaching and management.'

Turnover was slightly down from £4.4m to £4.3m. Income from the EFL and Premier League went up from £725k to £919k. Academy grant income from the EFL went up from £319k to £424k. Excluding football fortune, shareholder funding or donations the club generated £1.4m to pay for all its football activities. The operating loss was £675k.

Business turnover was up from £2.07m to £2.28m, an increase of 10 per cent. Ticket income was up by £46,000 or four per cent. Retail income was up by £90,000 or 42 per cent. Commercial income was up by £70,000 or nine per cent.

Income from player trading was down from just under half a million pounds to just over £200k. 'The balance between player trading and on-the-field improvement and success is always a difficult one, but it plays a part in the sustainability and viability of the club. It is part of our strategy to increase the value of our players by developing their talent, to improve the team and sell them for profit to then reinvest.'

Income from Cup matches and play offs was down from £735k to £223k. The Checkatrade Trophy contributed just £30k. Football Fortune income overall was down by £739k, but total football expenditure, primarily player costs, was up 15 per cent after a 22 per cent increase in the preceding year. 'As a result, the club incurred a very significant loss in supporting this increased spending on player costs.'

Total staff costs were 80 per cent of turnover. Spending on players was 96 per cent of the EFL allowance under Salary Cost Management Protocols (99 per cent in the preceding year). Spending was in the top quartile for League Two.

The total debt of the company was largely unchanged at just over £2m. £205k of new loans were received from related party shareholders and £484k of loans due to shareholders were exchanged for shares. Total bank and lease finance debt was down by £55k at £250,000.

Insurance costs trebled after the 2015 floods, a hazard that most clubs do not face. 'Control of costs is a challenge especially given the rising cost of the stadium.'

Fulham requires big funding from owner

After lengthy delays, Fulham’s shiny, new Riverside Stand has finally opened, creating “a unique Thameside destination with first class facilities for supporters and partners on match days, as well as for the wider community year-round”. This ambitious project has increased Craven Cottage’s capacity by around 4,000 to 29,600, while it has also taken advantage of the club’s fantastic location and wealthy catchment area by including two Michelin star restaurants, a rooftop swimming pool, corporate hospitality and event space, all benefiting from views of the Thames. Chief executive Alistair Mackintosh observed, “Fulham is the sort of club that can have a business class or first class and have fans that turn left on a plane.” Indeed, there is also an exclusive members club – with a football season ticket as an optional extra. It’s fair to say that “the times they are a-changing”, as this is a long way from the traditional pie and a pint. However, in a world where clubs face the tw...

Threat of financial calamity removed from Baggies

West Bromwich Albion had effectively been in decline ever since the club was sold to a Chinese consortium in August 2016, paying a figure north of £200m to buy former owner Jeremy Peace’s stake. Controlling shareholder Guochuan Lai’s ownership was fairly disastrous for the club, but his unloved tenure finally came to an end after Bilkul Football WBA, a company ultimately owned by Florida-based entrepreneur Shilen Patel and his father Dr Kiran Patel, acquired an 87.8% shareholding in West Bromwich Albion Group Limited, the parent company of West Bromwich Albion Football Club. This change in ownership was urgently required, due to the numerous financial problems facing West Brom, including growing high-interest debt and serious cash flow concerns, following years of no investment from the former owner. Indeed, West Brom’s auditors had already rung the alarm bell in the 2021/22 accounts when they cast doubt on the club’s ability to continue as a going concern without making player s...

A poor financial record, but new hope at Everton

I recently saw an amusing video online in which a group of Everton fans were rebuked in jest for being hopeful. Football fans in general tend to swing between excessive optimism and excessive pessimism, but for many it seems that moaning is in their bloodstream (Spurs fans probably take the trophy). However, Everton fans have had plenty to moan about on and off the pitch. Let’s hope that a new era is about to begin for this grand old club. Everton’s 2023/24 financial results covered a fairly momentous season, when they ended up 15th in the Premier League, though they would finished three places higher if they had not received an 8-point deduction for breaching the Premier League’s Profitability and Sustainability Regulations (PSR). It was a worrying time for Everton fans, as the club faced a “perfect storm” of issues, including large financial losses, an ever increasing debt burden, a challenging stadium build and the tortuous sale of the club. There were eve...

The Political Economy of Football V2

Search This Blog