From his Zurich base, the authoritative Swiss Ramble analyses the recently published 2019/20 accounts of Reading FC. It doesn't make for comfortable reading and brings home the financial challenges facing Championship clubs seeking promotion if they don't have parachute payments.
This was the
third season that Reading were under the control of Chinese businessman Dai
Yongge (and his sister Dai Xiu Li), who own 96% via Renhe Sports Management Co
Ltd. Former manager Mark Bowen said, “He has spent a hell of a lot of money on
the club and still wants to spend money.”
The club’s loss increased from £30m to £42m, largely due to
no repeat of prior year’s £8m from sale of the training ground and £2m other
operating income. Revenue dropped £3m (16%) from £21m to £18m.
Profit on player sales fell £0.8m to £1.6m. This is one of the lowest gains in the
Championship. The Royals have made very
little from player sales, averaging only £4.2m a year since 2011. Much poor
recruitment has resulted in numerous free transfers in order to get players
with high wages off the books. 2020/21 will be no better, only really including
Modou Barrow’s sale.
Most clubs in the Championship report large losses with many
of them losing more than £20m a year even before the pandemic. However, Reading’s
£42m loss is the second worst to date in 2019/20, only surpassed by Leeds
United £62m, which included a £20m promotion bonus
The Royals have posted losses in eight of the last 10
seasons, even managing to lose money in the Premier League in 2013. Their
annual losses have been increasing in the last three years (2018 £21m, 2019
£30m and 2020 £42m), amounting to an incredible £93m in this period.
The losses would have been even higher without £53m once-off
gains in past eight years, including property sales £26m, grants received £10m,
loan write-off £9m & investment disposals £8m. If the “questionable” £3m
player loan is also included, impact would be £56m.
Revenue has fallen by £19m (52%) in the last 3 years from
£37m to £18m, mainly due to parachute payments stopping. The club received £71m
in parachutes between 2014 and 2017. Nevertheless, broadcasting still most important
revenue stream with 46%.
Revenue of £18m is firmly in the bottom half of the
Championship. To highlight the magnitude of their challenge, this is around a
quarter of the £71m earned by clubs in receipt of parachute payments following
relegation from the Premier League.
The wages to turnover ratio increased from 194% to 211%, the
worst to date in the 2019/20 Championship. In fairness, 19 of the 24 clubs in
this division are over 100%, which is well above UEFA’s 70% upper limit, but
Reading’s ratio is particularly poor.
Renhe Sports now owns the Madejski Stadium, though it has
been leased back to the football club for £1.5m annual rent, while the training
ground is owned by Sun Elegant Group. These sales are within the EFL rules, but
the Swiss Ramble notes this is still some fancy financial footwork.
The club did not detail the impact of the COVID-19 pandemic
on these financials, though it is not likely to be very significant in 2019/20.
The Swiss Ramble estimates around £2m for losses in match day and commercial
income. It will be higher this season,
as games still played without fans.
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