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.
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