Swansea profit 'a noteworthy achievement'

The Swiss Ramble has been applying his forensic financial skills to the latest set of Swansea City accounts from his Zurich base.

Swansea swung from a pre-tax loss of £7m to a profit of £2.7m, despite revenue falling £18m (27%) from £68m to £50m and profit from player sales dropping £12m (41%) from £30m to £18m, as total expenses were reduced by £40m (38%). Profit after tax was £1.7m.

The fact that Swans managed to make a £3m profit is a noteworthy achievement. Only one other Championship club is also profitable in 2019/20 to date (Hull City £3m), while some have reported huge losses, including Leeds United £62m, Reading £42m, Middlesbrough £36m and WBA £23m.

Swansea have now been profitable six times in the last nine years. In the seven seasons in the Premier League (between 2012 and 2018), profits amounted to £36m. Even the last two seasons in the Championship have only resulted in a small net loss of £4m.

The main reason for the £18m revenue reduction was broadcasting, which dropped £13m (25%) from £52m to £39m, mainly due to lower parachute payment, though commercial was also down £2m (26%) to £6m and match day fell £1.7m (26%) to £4.8m. Player loans were down £1.7m to £0.2m.

The revenue decrease last season was mainly driven by parachute payment dropping from £43m to £34m, though broadcasting still accounts for 78% of total revenue. The parachute will further fall this season to £15m, then down to zero from 2021/22.

Since relegation from the Premier League, revenue has dropped £77m (61%) from £127m in 2018 to £50m in 2020, very largely due to less TV money in the Championship, though commercial is also down £9m (56%) in the last two years.

Commercial revenue fell £2.1m (26%) from £8m to £5.9m, comprising £4.0m commercial income and £1.9m other, the lowest since 2013. This is in the bottom half of the Championship, a long way below the likes of Leeds United £34m and Bristol City £14m.

Even after the fall, the £50m revenue was still one of the highest in the Championship, though they were overtaken by Leeds (massive commercial income). They will also be behind the three clubs most recently relegated from the Premier League, when they publish their accounts.

They would receive much more broadcasting money if they manage to reach the Premier League this season via the play-offs. Even last place in 2018/19 received £97m, while the new TV deal from 2019/20 onwards is 8% higher (before COVID rebate).

The club have not quantified the effect of COVID-19, though this obviously impacted gate receipts, retail and hospitality revenue, even though they took advantage of government support schemes. The full economic effect will not be clear until next year’s accounts are published.

£18m profit from player sales was “used to fund the overall operating loss”, though down from prior year’s £30m. Mainly came from sale of Oli McBurnie to Sheffield United. Still pretty good, but a fair bit lower than Bristol City £26m, Brentford £25m and Hull City £23m.

{Like many clubs across football] Swansea have become increasingly reliant on player sales with average annual profit increasing to £33m in the last 4 seasons, compared to just £8m in the preceding 6 years. This season will similarly benefit from Joe Rodon’s sale to Spurs.

If forecast player sales are not achieved, they would need to find further sources of funding to maintain cash flow. The auditors said, “This represents a material uncertainty which may cast significant doubt about the club’s ability to continue as a going concern.”

The wage bill fell £9m (19%) from £48m to £39m (excluding £1.7m onerous contracts provision in reported £40.2m), which means wages have been cut £52m (58%) in 2 years since relegation (revenue down £77m in same period). Lowest wage bill since £35m in 2012.

The wages to turnover ratio increased from 70% to 77% (80% including the onerous contracts provision), one of the lowest (best) in the Championship. Incredibly, no fewer than 19 clubs are above 100% with Reading “leading the way” with 211%.

Yje club have bought the land at the south end of the stadium, while acquiring 100% of the company responsible for the Liberty Stadium management. This would facilitate stadium capacity expansion, but this would only be considered after a return to the Premier League.

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The Political Economy of Football V2

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