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Derby County wage bill needs to be controlled

Derby County’s 2016/17 financial results covered the second season since Mel Morris purchased the club. The authoritative Swiss Ramble has been giving his thoughts on them. He notes that, 'A review of Derby County finances is complicated by the structure, where a holding company, Sevco 5112 Ltd, owns The Derby County Football Club Ltd plus 3 new companies: Club DCFC Ltd (catering & hospitality), Stadia DCFC Ltd (commercial & sponsorship) and Derby County FC Academy Ltd.'

The club's loss reduced by almost £7m from £14.7m to £7.9m, mainly due to £16m increase in profit on player sales to £16.2m, though revenue also rose £6.5m (29%) to £29.0m. The last time the Rams made money was 2008 (in the Premier League). Since then, they have had nine years of losses, amounting to £80m.

The main reason for the Rams' revenue growth was the Premier League solidarity payment, up from £2.3m to £4.3m, which meant broadcasting income rose £2.3m (41%) from £5.6m to £7.9m. Commercial also rose £3.8m (44%) to £12.4m, while match receipts were up £0.4m (4%) to £8.7m.

The club's £8m loss was the 10th highest in the Championship. As the club stated, 'In order to compete in the world’s most competitive league, significant investment is required.' Almost all clubs lost money with only 5 clubs profitable in 16/17 (Nottingham Forest and Barnsley due to loan write-offs).

Attendances have steeply declined from over 32,000 in the Premier League to 27,175 in 2017/18. Worth noting that the club restated down the attendance figure for 2016/17 from previously reported 29,085 to 27,885, so previous seasons’ figures should be treated with caution. Nevertheless Derby's 27,885 attendance was still the fourth highest in the Championship. Season ticket prices have been frozen for 2018/19 for the third year in a row.

Commercial income was up an impressive 44% (£3.8m) from £8.6m to £12.4m, comprising sponsorship £5.0m, commercial & hospitality £4.1m, merchandising £0.3m, programme sales £0.2m and other receipts £2.9m. Commercial income is the fifth best in the Championship, just £400k below Aston Villa, though £4m less than Leeds.

The wage bill rose £1.4m (4%) to £34.6m, though the wages to turnover ratio decreased from 147% to 119%. The wage bill has virtually tripled since £12.1m in 2013. The wages to turnover ratio is the sixth highest (worst) in the Championship, as over half the clubs in that division have ratios above 100%.

Even if we take the lower football club £35m wage bill, this was still the fifth highest in Championship (though way behind Newcastle United £80m and Aston Villa £61m). Morris admitted, 'The reality is that we still have a very high wage bill. It’s something we need to get under control.'

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