Charlton's financial woes

The Swiss Ramble casts his forensic eye over Charlton's 2019/20 accounts.   What is clear is the long-term financial limitations the club has faced.

Following promotion to the Championship, Charlton reduced their loss from £10.1m to just £1.1m, as revenue increased £7.5m (95%) from £7.9m to £15.4m and profit on player sales rose £1.5m to £4.4m, partly offset by expenses growing £3.3m (17%).

The £1.1m deficit was actually one of the best results in the Championship. Only three clubs made a (small) profit in 2020, while some huge losses were reported: Stoke City £88m, Leeds £62m and Fulham £48m (latter two included promotion bonuses).

The operating loss (excluding player sales, exceptional items & interest) improved from £12m to £7m, which was actually one of the best performances in the Championship. Nearly every club in this division posts substantial operating losses, i.e. almost half were above £30m.

Charlton are no strangers to a loss, having only reported a profit once in the last decade – and that was just £1.2m in 2017. Their total losses amounted to £60m over this period. As owner Thomas Sandgaard wryly observed, “It is expensive to run a football club.”

The profit posted by the Addicks in 2017 was largely due to £16m from player sales, including Lookman to Everton. Otherwise, they did not manage to make more than £5m in any other year in last decade. The 2020/21 season will include £5.6m income, mainly Bonne to QPR and Doughty to Stok

The revenue increase was mainly driven by broadcasting income rising £6.3m from £1.5m to £7.8m, due to higher TV distributions in the Championship, while commercial increased £0.8m (36%) to £3.0m and match day grew £0.4m (9%) to £4.5m. Other income included £634k furlough grant.

Despite COVID impact, the £15.4m revenue was £3.3m (27%) higher than the last time they were in the Championship in 2016. Promotion from League One was worth £7.5m. Broadcasting is the most important revenue stream with 51%, followed by match day 30% and commercial 19%.

The total commercial income rose £0.8m (36%) from £2.2m to £3.0m, partly due to more streaming on Charlton TV. This was the club’s highest since 2008, but still firmly in the bottom half of the Championship, far below likes of Leeds £34m, Bristol City £14m and Stoke City £1

Even after the growth in 2019/20, the £15m revenue was still one of the lowest in the Championship. Their financial challenge in this division was highlighted by the fact that this was around a quarter of Fulham £58m, Leeds £54m, WBA £54m and Huddersfield £53.

if parachute payments were excluded, Charlton  would still have only had the 17th highest revenue in the Championship with the gap to Leeds United £54m (due to massive commercial income) being a chunky £39m.

the profit on player sales rose £1.5m to £4.4m, including Dijksteel to Boro plus contingent payments on previous sales (Lookman, Gomez, Palmer, Pope and Grant). That’s a solid improvement, but still a fair bit lower than WBA £29m, Bristol City £26m, Fulham £25m & Brentford £25m

The Swiss Ramble estimates that COVID led to £1.6m reduction in revenue, split between £1.2m lost (match day £0.9m, TV rebate £0.3m) and £0.5m broadcasting deferred to 2020/21, offset by £0.7m furlough income under government job retention scheme, leading to a net £1.0m adverse impact.

The average attendance (for games played with fans) increased 52% from 11,827 to 18,017, the club’s highest since 2013. Mid-table in the Championship, but Charlton’s potential was highlighted by their highest home crowd of 25,363 against Blackburn Rover

The wage bill increased £1.8m (17%) from £10.4m to £12.2m, “primarily reflecting the increased cost of player wages in the Championship”. That said, this was £1.2m (9%) lower than the last time Charlton were in this division in 2016.

Despite the increase, the £12m wage bill is one of the lowest in the Championship, only above Barnsley £11m, so it was perhaps unsurprising they were relegated.

The wages to turnover ratio improved from 133% to 80%, their lowest since 2009 (when they had a parachute payment). The vast majority of clubs in the Championship have (unsustainable) ratios over 100% with Reading “leading the way” at 211%.

Charloton spent £522k on motor vehicles, i.e. twice as much as £262k on new players. Agreements terminated after year-end at a cost of £261k. Sandgaard highlighted previous ownership’s profligacy by giving away one of the infamous Range Rovers in “Our Club Your Car” campaign.

The club only spent £262k on new players in 2020, partly due to a transfer embargo imposed by EFL. This was the second lowest in the Championship, only ahead of QPR £55k, but miles below Fulham £53m and Leeds £46m