Healthy finances at Norwich rely on player sales

The authoritative Swiss Ramble reviews Norwich’s financial results for 2020/21, when they increased pre-tax profit from £2.1m to £21.5m, despite the impact of relegation to the Championship and COVID reducing revenue by £62m to £57m, thanks to £60m profit from player sakes.

it was a notable achievement for to post a £21.5m pre-tax profit. In fact, this was better than any other club in the Championship in 2019/20, when just three clubs were profitable (all of which were only around £3m). It used to be the case that they were profitable in the Premier League, but lost money following relegation, but they were also profitable twice in last 4 years they were in the Championship.

Main driver of the revenue decrease was broadcasting, down £41m (46%) from £90m to £49m, as TV deal much more lucrative in Premier League, while gate receipts dropped from £7.6m to just £0.1m as games played behind closed doors and commercial fell £13m (62%) from £21m to £8m. Despite the significant decrease, the £57m revenue was still one of the highest in the Championship, around the same level as three other relegated clubs in 2019/20,

After surging to £21m in the Premier League, commercial revenue dropped £13m (62%) to £8m after relegation, with big falls in sponsorship and advertising from £10.3m to £2.7m and catering from £4.6m to £0.4m, as COVID took a toll. This is still pretty good for the Championship.

The bottom line was massively boosted by £60m profit from player sales, up from only £2m prior season, including the club record sale of Emi Buendia to Aston Villa. By far the highest in Championship in the last two years.

The business model is very dependent on player sales, where they have made an impressive £158m profit in the last 7 years, including £60m in 2021 and £48m in 2018, mainly due to the big money sales of James Maddison to Leicester City and Josh Murphy to Cardiff City. The club have the two highest annual profits from player sales in Championship history. [Clubs across the board are becoming more reliant on player sales to stay in the black].

Championship revenue ranking is hugely influenced by parachute payments. Details for 2020/21 have not yet been published, but relegated clubs received £42m in the first year in 2019/20. If Norwich are again immediately relegated this season, will only get two years of parachutes.

The wage bill fell £22m (25%) from £89m to £67m following relegation, though this was still the club’s third highest ever. Wages would have been much lower without a good-sized bonus payment for the Championship-winning promotion exploits. Despite the decrease, the £67m wage bill was still one of the highest in the Championship, though the three largest were all inflated by promotion payments.

Following the big decrease in revenue due to relegation and COVID, the wages to turnover ratio increased from 75% to 117%, though not as high as 2019 (when they had no parachute payments). The vast majority of clubs in the Championship have (unsustainable) ratios over 100%.

gross debt more than doubled from £14m to £29m, mainly £25m bank loan secured on TV money, repayable by September 2022, plus £2.3m Canary Bond and £250k from directors to help fund the new training ground. Also includes £1.4m preference shares classified as debt. Even after the increase, the club’s £29m debt was still one of the smallest in the Championship, miles below the likes of Stoke City £187m, Blackburn Rovers £156m, Birmingham City £116m and Middlesbrough £116m.

The Canaries paid £978k interest in 2020/21, down from prior year £2.5m, though their bank loan charges a chunky 5%. Most debt in the Championship is provided interest-free by club owners, so only 5 clubs pay more than £1m annual interest.

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The Political Economy of Football V2

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