Should Huddersfield have spent more to stay up?

The tireless Swiss Ramble analyses the 2018/19 accounts of Huddersfield Town. He comments, they 'deserve praise for reaching the top flight (and surviving two seasons) on a very low budget compared to others. They concluded, “Whilst relegation was clearly disappointing, the club is generally in a much better position than it was prior to promotion to the Premier League."'

Profit before tax fell £26m from £30m to £4m, as revenue decreased £6m (5%) from £125m to £119m, profit on player sales halved from £6m to £3m and expenses rose £17m. After tax, prior season’s £26m profit was down to £3m, as the tax charge dropped from £4.1m to £0.5m.

The £6m revenue fall was almost entirely driven by broadcasting’s £6m (5%) decrease from £110m to £104m, due to lower finishing position in the Premier League, while commercial also dropped £0.5m (5%) to £10.0m. However, match day slightly rose by £0.2m (2%) to £5.0m.

The £119m revenue is still £103m higher than £16m generated in season before promotion. Also more than twice as much as last 5 years in the Championship combined (£60m). Will dramatically fall in 2019/20 by around £60m, despite parachute payment.

The £119m revenue was easily the lowest in the Premier League with the closest clubs being Cardiff £125m and Bournemouth £131m. In truth, it was a great achievement to survive more than one year in the top flight. For some perspective, Manchester United £627m was over half a billion higher.

The Swiss Ramble observes, '£4m pre-tax profit was not huge, but it is very creditable, given that half of the clubs in the Premier League have lost money, including two clubs above £100m (Everton and Chelsea).' Ironically, if Town had stayed up, they would have made a loss, due to performance bonuses. Profit is all the more impressive, given they made just £3.4m from player sales (down from £5.9m), mainly Tom Ince to Stoke City. Chelsea made £60m from this activity.

The club have been profitable in both their Premier League seasons. Before promotion, the last time they made money was back in 2006 – and that was less than £100k. Usually posted small losses except 2016/17, when the £20m loss was impacted by estimated £12m promotion bonuses.

An amazing 87% of revenue came from broadcasting, though to be fair this is far from unusual in the top flight In fact, 13 of the clubs in the Premier League earn more than 70% of total income from TV, though only Bournemouth were more reliant than Town on this revenue stream.

TV income will significantly fall in 2019/20, though will be cushioned by a £43m parachute payment, which is much higher than £4.6m solidarity payment that most Championship clubs receive. Will get three years of parachutes (unless promoted), worth around £93m in total.

Commercial income fell £0.5m (5%) to £10.0m, mainly due to retail dropping £0.6m. This was the lowest in the Premier League, just behind Bournemouth £10.2m, Cardiff City £10.4m and Brighton £11.4m. Likely to fall further in the Championship.

Wage bill only slightly grew by £1.6m (2%) from £62.6m to £64.2m, though this masks a bigger underlying increase in the cost of the first team squad, offset by no repeat of prior year Premier League retention bonuses. Wages to turnover ratio increased from 50% to 54% [well within recommended limits].

This was actually the second smallest in the Premier League, only ahead of Cardiff City £54m, but £20m below the next lowest Watford £84m. Will fall in Championship following departure of some high earners and relegation clauses. Fans will wonder if they would have had a better chance of survival if they had spent more. Of the three relegated clubs, it was higher than Cardiff 43%, but lower than Fulham 67%.

The club spent £46m on players, including Kongolo, Diakhaby, Hadergjonaj, Bacuna, Lössi and Grant, which was more than Cardiff £38m, Burnley £33m, Spurs £22m and Watford £21m. Although less than prior season’s £59m, still the second highest in the club’s history.

Gross debt increased £27m from £50m to £77m. The amount owed to former owner Dean Hoyle fell from £49.4m to £45m, while a new £31m bank loan (covered by future TV money) was taken out. Club argued this was to spread the risk, which seems a little strange.

The debt of £77m was still quite low in the Premier League, though it has grown from £11m in 2010. As part of the club sale agreement, a repayment schedule has been agreed for Hoyle’s £45m: summer 2020 £15m; August 2021 £10m; August 2022 £10m; no fixed date £10m.

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The Political Economy of Football V2

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