The authoritative Swiss Ramble has applied his forensic eye to the accounts of Swansea City. They are now in the third season under the control of the American consortium led by Stephen Kaplan and Jason Levien, who own 68% of the shares. To date, these owners have been unwilling (or unable) to put any money in, saying player sales should cover any shortfall.
In 2017/18 they made a loss before tax of £3.2m, compared to a prior year profit of £13.4m, representing a £16.6m deterioration, as revenue fell £1m from £128m to £127m, though profit on player sales was up £9m to £46m. After tax, the club went from a £13.0m profit to a £2.9m loss.
Although Swans £3m loss is clearly not great, it is by no means the largest in the Premier League, as six clubs have higher deficits, including Palace £36m, Watford £32m and Stoke £30m. Against that, some were very profitable, e.g. Spurs £139m, Liverpool £125m, Arsenal £70m and Chelsea £67m.
The loss would have been much higher without £46m profit on player sales, including Sigurdsson, Llorente, Fabianski, Mesa and Bartley, up from £37m prior season. This was the seventh highest in the Premier League, though still far below clubs like Liverpool £124m, Arsenal £120m and Chelsea £113m. The club admits that player trading is the 'primary source' of income, evidenced by £83m profits on player sales in last 2 seasons. Excluding this, the underlying loss has increased four years in a row.
Broadcasting revenue fell £4.7m (4%) from £109.4m to £104.7m, which was the eighth highest in the top flight. Premier league distribution is fairly equitable, but European money can make a big difference, e.g. the Champions League entrants earned between £36m and £72m.
TV money from the Premier League fell £4.7m from £103.2m to £98.5m, as finishing 18th compared to 15th in the previous season meant that the merit payment halved from £11.6m to £5.8m. Nevertheless, a hefty 83% of Swans revenue came from TV (£105m out of £127m), though in fairness it should be noted that no fewer than 12 of the 20 Premier League clubs get more than 75% of their income from this source, with Bournemouth 'leading the way' with an amazing 89%.
The Abertawe club have been profitable five times in their seven Premier League seasons, but they have posted losses twice in the last three years. Talking about 2018/19, chief operating officer Chris Pearlman warned, 'We’re not going to make any money this year, we’re going to lose money.'
The (admittedly marginal) £1m revenue fall was very largely driven by broadcasting’s £4.7m (4%) decrease from £109.4m to £104.7m, due to less prize money for a lower league position. In contrast, commercial rose £3.8m (35%) from £10.7m to £14.5m, while match day was flat at £7.4m.
Revenue nearly doubled in the Premier League from £65m in 2011 to £127m. Almost of all of this £62m growth has come from TV £56m (new deals in 2014 and 2017). The club noted that relegation has resulted in revenue falling by £65m, which Pearlman described as 'a pretty big drop.' Indeed.
Swans had the 18th highest revenue in England, exactly in line with their final league position, only ahead of Huddersfield Town and WBA £125m, around the same as Watford and Stoke City. For more context, they were a quarter of a billion below sixth placed Tottenham.
The wage bill fell 10% (£10m) from £99m to £89m, having excluded £1.7m onerous contracts provision from reported £90.7m. Figures likely to include payouts to numerous sacked managers. Wages spiraled out of control: up £54m (160%) since first year in Premier League in 2012. However, Swans £89m wage bill was one of the smallest in the top flight, even lower than fellow relegated clubs, Stoke £94m and WBA £92m, as Premier League survival bonuses were not paid. Number of employees up 40 to 409, partly due to taking on stadium management.
The wages to turnover ratio improved from 77% to 70% (72% including the onerous contracts provision), better than 84% in 2015/16, but much higher than 53% in the first season back in the Premier League. This was the 8th highest (worst) in the top flight.
The wage bill should fall further, as the owners have spoken of the need for 'hard medicine' following relegation. Many high earners on loan likely to leave, e.g. Ayew brothers, Borja, Montero and Carroll.
In their seven seasons in the Premier League Swans generated £82m cash from operations, bolstered by £11m loans. Most was spent on new players £61m, plus £28m on infrastructure and £4m dividends. Unlike many other clubs, there has been no funding from the owners.
The club had a £26m cash loss from operations in 2017/18, which was partly covered by (net) £16m from player sales and £4m additional loans. However, £2m infrastructure investment resulted in a net cash outflow of £7m.
The 2017/18 shirt sponsor was LeTou for £4.5m a year, but from 2018/19 there is a new deal with Bet UK. They have a long-term kit supplier agreement with Joma. Low Cost Vanda are shorts sponsor. Barracuda Networks were the first sleeve sponsor in 2017/18.
Their external loans accrue interest at 4.5% a year, though they only actually paid £133k in 2017/18, a fair bit lower than some other clubs who have to pay largish amounts of interest, e.g. Watford £3.3m, Southampton £1.2m and Crystal Palace £0.7m.
The Abertawe club's gross transfer spend quadrupled over the last four years from an annual average of £10m to £40m, but the owners admitted that 'our recruitment strategy hasn’t been good enough' and 'fans have every right to be critical about some of the transfer decisions.'
Average attendance was basically flat at 20,623. Attendance was the third lowest in the top flight, only ahead of Watford and Bournemouth. Their advance through the leagues had been matched with growth in attendances, facilitated by the move to the Liberty Stadium in 2005. Crowds have unsurprisingly fallen in the Championship to 18,456.
After relegation Swans benefited from a £42m parachute payment in 2018/19, but total TV revenue of £45m will be around £55m lower than in the top flight. On the other hand, most Championship clubs only receive £8m. Parachute will drop to £34m in 19/20, then £15m in 20/21 (if not promoted).
Pearlman said that Swans are 'in a much stronger position”'than they were over the summer, but added, 'we cannot roll the dice – we’re losing money.' The club’s strategy is 'to work hard to find the right balance between success on the field and prudent financial management.'
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