Skip to main content

On pitch progress for Forest but financial challenges remain

Nottingham Forest have been doing well on the pitch, but face financial challenges off it.   The authoritative Swiss Ramble reviews their latest accounts.

Nottingham Forest’s 2020/21 accounts saw their loss narrow to £15.5m, despite revenue falling £6.9m to £18.4m, due to COVID.    This was helped by £14.3m profit from player sales.  Debt was £37m after further conversion to equity and loan write-off.

It is their fourth season under the ownership of Evangelos Marinakis (80%) and Sokratis Kominakis (20%).

Like most Championship clubs, Forest make large operating losses, partially offset by player trading, as they compete against those with parachute payments. If they do not secure promotion this season, they will come under pressure to sell rising stars like Brennan Johnson.

Remaining within the EFL Profitability and Sustainability Rules is a “high priority”.   The Zurich-based expert calculates they have just met the target, after allowable deductions for academy, community, infrastructure and COVID (limited to £5m a year), but excluding loan write-offs.

The Championship is a division that has an endless appetite for owner funding, so  the £149m provided in the 10 years up to 2020 was by no means the highest, much lower than the likes of Fulham £315m and QPR £285m. 

In the last 10 years various owners have pumped £140m into Forest, boosted by £19m from (net) player sales and £17m external loans. The vast majority of this money has been used to simply cover operating losses with only £9m on improving infrastructure.

Although debt is high in the Championship, most of it has been provided by owners who charge little or no interest, though Forest paid £418k in 2020/21. Only one club has an interest payment over £1m, namely Cardiff City with £1.9m.  £37m gross debt is not that large for the Championship, far below the likes of Stoke City £187m, Blackburn £156m, Birmingham City £116m and Boro £116m. Forest’s holding company has £89m debt. Not an issue – so long as the owners continue to provide support.

The club spent £3.9m on player purchases, their lowest for 5 years and well down from £22.7m in 2019.  This is relatively small for the Championship, even below Barnsley and Preston North End.

The wages to turnover ratio increased from 151% to 202%, obviously affected by COVID revenue loss. Most clubs in the very competitive Championship had ratios above 100%, but Forest are one of the highest (worst). This should improve after many summer departures.   Following this growth, the £37m wage bill was 8th highest in the Championship, so they punched well below their weight last season.

The wage bill fell slightly (2%) from club record £38.1m to £37.2m. However, this is still £9.5m (34%) higher than three years ago, despite revenue dropping £4.3m (19%) in that period, which neatly encapsulates Forest’s financial predicament.

Forest terminated their shirt sponsorship with Football Index after the online betting company went into administration.  They were replaced by BOXT for remainder of 2020/21, extended to 2021/22 in similar sized deal. More encouragingly, Macron extended the kit deal by 5 years to 2026.

Plans to redevelop the City Ground, replacing the Peter Taylor Stand, have been delayed, but the club submitted a planning application in November. One objective is to increase revenue via improved hospitality and executive boxes.

Average attendance in 2019/20 (for games played with fans) was 27,723, only surpassed by Leeds in the Championship. This was around 40% higher than the 19,676 low four years before that.

Broadcasting income rose £1.2m (12%) from £9.8m to £11.0m, comprising grants and royalties £9.6m and TV and radio £1.4m. Most Championship clubs earn £7-10m, but there is a massive gap to clubs in receipt of parachute payments.

Championship revenue is hugely influenced by parachute payments, which are so large that they make it difficult for clubs like Forest to compete. Details not published for 2020/21, but in 2019/20 a relegated club received £42m in year one, £34m in year two and £15m in year three.



Comments

Popular posts from this blog

It's no deal say Spurs insiders over Taiwanese takeover

Senior figures at Tottenham Hotspur insisted on Friday that they had not been informed of any deal to sell Daniel Levy’s stake in the club. A business group, Eight Sports Capital — which is said to include a billionaire Taiwanese financier — claimed that it had an agreement in place to buy a 24.99 per cent stake in ENIC, the club’s majority owners, from Levy, who owns 29.88 per cent. The Times has been told Ng Wing Fai and Brooklyn Earick form part of the group, having both been linked previously to potential takeovers of the Premier League club. The Taiwanese businessman, Richard Tsai, is also said to be part of the consortium. He is reportedly worth £7 billion.  Last year Earick, the former DJ and tech entrepreneur, was part of an attempted £4.5 billion takeover, which was “unequivocally rejected” by Spurs.  An ENIC spokesperson said: “We can confirm that neither ENIC nor THFC are aware of any sale by Daniel Levy’s Family Trust of its minority stake in ENIC, THFC’...

Reports about Charlton sale exaggerated

Reports have appeared in The Guardian and elsewhere that Charlton has been put up for sale. Richard Cawley is an authoritative local journalist who runs a South London Sport substack site.  He reached out to the club yesterday evening to ask for comment on The Guardian’s article. Early indications from the club have been that nothing has changed since the story about them seeking investment, except that it is now a different company doing it. Charlton have since managed to consolidate their place in the Championship, avoiding an instant return to League One, with their women’s side promoted to the WSL, returning to the top flight for the first time since 2007, although staying there is likely to be costly. It would be counter-intuitive for owners Global Football Partners not to progress the club when looking for investment, that the focus remains on driving it forward, that their spend this summer is in line with long-term planning and will see an increase in wages spent on players...

Hull City's 'strange' loan

When football finance guru Kieran Maguire seems flashing lights in a club's loan deal, I become concerned.  He is the leading football finance expert in the UK. Hull City have borrowed £55m against their stadium and training ground yet they should get £30m from the Premier League before long.  What is going on? https://www.bbc.co.uk/sport/football/articles/cpwel48y51do