Cardiff pay the price for promotion

The authoritative Swiss Ramble has commented on the recently published 2017/18 accounts of Cardiff City. He notes, 'Carfiff paid the price of success, as the loss before tax almost doubled from £21m to £39m, mainly due to £23m of promotion bonuses and other contractual payments.' The loss after tax was £36m following a £3.3m tax credit.

Most Championship clubs lose money, but Cardiff loss of £39m is one of the largest in 2017/18. However, it is worth noting that the three biggest losses came from clubs promoted to the Premier League. For Cardiff promotion was very timely, as 2017/18 was the last year of parachute payments, but the club can now expect around £120m in the Premier League in 2018/19. Adding in parachute payments, promotion was worth about £170m.

Since Vincent Tan bought the Bluebirds in May 2010, the club has accumulated £133m of losses, averaging £17m a season. The only time they managed to make a profit was £4m in 2015, due to one off factors, while they even made a £12m loss in their one (completed) season in the Premier League in 2014.

Revenue increased £6m (21%) from £28.8m to £34.8m, mainly due to commercial income climbing £3.9m (83%) to £8.5m, though match day also rose £1.3m (37%) to £4.8m and broadcasting income was up £0.9m (4%) to £21.4m. Profit on player sales fell £3.1m to £2.4m. Few Championship clubs make big money from player trading, except those relegated from the Premier League.

Championship revenue is greatly influenced by Premier League parachute payments. In 2017/18 Cardiff City received £17m, giving them a total of £79m over the last four years. If they are relegated, they will receive parachute payments again, although they would be limited to two years by the fact that they survived in the top flight for just one season.

Attendances steeply declined from 27,400 in the top flight to 16,400 in 2015/16, but strongly rebounded in the 2017/18 promotion season to over 20,000, not least because the cheapest season ticket price in 2017/18 was £50 lower. Up to over 31,000 in the Premier League. The 20,164 attendance was only the 13th highest in Championship last season, a long way behind the top two (Villa 32,097 and Leeds 31,521). This season’s 31,000 average is around 4,000 (15%) higher than the last time the Bluebirds were in the Premier League in 2013/14.

The wage bill surged £19.4m (67%) to £48.4m, largely due to promotion bonuses. The wage bill had been steadily declining following 2014 relegation (in line with lower parachute payments) until 2017/18. The wages to turnover ratio worsened from 101% to 139%, though this was far better than the 189% in the last promotion season. It is also lower than the other two promoted clubs: Wolves 192% and Fulham 142%. In fact, over half the clubs in the Championship are above 100%.

Total directors’ remuneration increased by more than 400% from £283k to £1.429m, presumably also driven by promotion bonuses. This was actually the highest in the Championship in 2017/18.

Cardiff spent £14m on players in 2017/18, including Madine, Ward, Tomlin and Bogle, the 10th highest in the Championship. However, they only spent £23m over the last three seasons, so cannot be accused of 'buying' promotion. Since the accounts were published, club have spent £35m on acquiring players, though the status of the tragic Emiliano Sala’s transfer is unclear.

Gross debt rose was cut from £138m to £74m, mainly £72m owed to owner Vincent Tan (down £43m) plus £1.4m other loans (down £10m). The club repaid the £11m owed to Tormen Finance Inc (in which club chairman Mehmet Dalman has a significant interest). Nevertheless, it was still the fourth highest debt in the Championship.

Tan and his friends have put a huge amount of money into the club, around £206m (£191m loans & £15m new share capital). This has covered large operating losses, while funding player purchases and infrastructure investment, so that the books are balanced from a cash perspective.

The Swiss Ramble concludes, 'Cardiff City finances will have been transformed this season in the lucrative Premier League, though it does look like they will return to the Championship after just one year. As Neil Warnock has suggested, given the club’s very low wage bill, this always looked on the cards.'

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The Political Economy of Football V2

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