Boro: the ultimate benefactor club?

The formidable Swiss Ramble reviews Middlesbrough’s 2020/21 accounts, when they reduced pre-tax loss from £36m to £31m, but still one of the highest in the Championship.

Boro reduced their pre-tax loss from club record £36m despite revenue dropping £4.9m (25%) from £19.4m to £14.5m, as other income rose £2.7m to £4.6m, operating expenses were cut £5.7m (10%) and profit on player sales rose £0.8m to £4.3m. Loss after tax was £27m.

They have lost money eight times in the last decade with their cumulative losses adding up to £157m. Over the last two years their deficit is £66m, partly due to COVID, but also the end of parachute payments.  They posted a £7m profit in the Premier League in 2017.

The club also benefited from parachute payments in 2018 (£42m) and 2019 (£35m), but these have now ended. These are so significant that they make it difficult for others to compete, e.g. in 2019/20 a relegated club received £42m in year one, £34m in year two and £15m in year three.   [This will be an issue for the proposed independent regulator to look at, but don’t hold your breath, WG].

Big revenue fall

Revenue has fallen by three-quarters (£48m) since the first season after relegation from the Premier League in 2018, very largely due to £37m decrease in broadcasting after parachute payments ended, though there were also reductions in gate receipts £7m and commercial £4m.

Following the decrease, the £14.5m revenue is firmly in the bottom half of the Championship, only around a quarter of the clubs receiving parachute payments

Revenue was “significantly” impacted by COVID, leading to reductions in gate receipts, down £4.5m (99%) to just £36k, and commercial, down £1.6m (26%) to £4.3m. However, broadcasting increased £1.1m (12%) from £9.0m to £10.1m, partly due to iFollow streaming.

The club did not detail the impact of the COVID on these financials, though the Swiss Ramble would estimate this as around £6m in 2020/21: match day £4.2m (games played without fans) and commercial income £1.6m. So the club would have still posted a big loss even without the pandemic.

Commercial revenue fell £1.6m (27%) from £5.9m to £4.3m, comprising sponsorship & commercial £2.6m and merchandising £1.7m. This is down 60% from the £11.1m peak in the 2017 Premier League.  This is the lowest since 2014 and only around a third of Stoke City’s £12m.

Boro compensated for the revenue decline by cutting costs. Wage bill fell £4m (13%) from £31m to £27m, while player amortisation decreased £6m (32%) to £13m. On the other hand, other expenses were up £3m (44%) to £10m (rather odd) and they booked £1.3m player impairment.

Despite the improvement, the £31m loss is still one of the worst in the Championship, only surpassed by Bristol City £38m and Reading £36m to date in 2020/21.

Player sales and transfers

Profit on player sales rose £0.8m from £3.5m to £4.3m, which was mid-table in the Championship. However, this was significantly lower than the 3 clubs relegated from the Premier League, who each generated £56m to £60m, another advantage on top of parachute payments.

One reason that Boro losses have increased in the last two years is relatively low profits from player trading. After £60m of gains in the three years between 2017 and 2019, they have only made £8m since then. The 2021/22 accounts will include a similarly low figure.   [Clubs across Europe have become increasingly reliant on player trading, but it is a volatile and unreliable source of funds, WG].

Boro spent £7.1m on player purchases, including Akpom and Morsy. Slightly higher than prior season’s £6.5m, but only around a tenth of the massive £66m outlay three years ago, which one time manager Tony Pulis described as “the most disastrous transfer window in the club’s history”.

In the three years between 2016 and 2018 Boro really pushed the boat out, as they averaged gross spend of £52m, compared to £4m in the preceding four years. However, in the three years since then, this has dropped to £8m with £19m sales, leading to £11m net sales.

Wages down

The wage bill fell £4m (13%) from £31m to £27m, as the club “significantly reduced the size and cost of the playing squad to partially offset the reduction in income”. Wages down 58% (£38m) from £65m peak four years ago in the Premier League.

Following the decrease, Boro‘s £27m wage bill is now in the bottom half of the Championship, making promotion even more difficult.   It is less than half of Watford at £68m.

The wages to turnover ratio increased from 160% to 186%. This is obviously far from great, but in fairness the vast majority of clubs in the very competitive Championship have unsustainable ratios well above 100% (incredibly five of them are over 200%).

Average attendance in 2019/20 (for games played with fans) was 19,933, which was 11th highest in the Championship. This is over 10,000 lower than the 30,449 they achieved in the Premier League, but they are averaging more than 21,000 this season.

Debt

Gross debt rose £13m from £116m to £129m. Most of this is owed to Steve Gibson, who increased his loan by £5m to £121m, but there is also a new £8m loan from the EFL, secured against future TV income.

The £129m gross debt is the fifth highest in the Championship, only below Stoke City £212m, Cherries £165m, Blackburn £152m and Watford £139m. The debt would have been even higher if £63m had not been converted into share capital, highlighting Gibson’s financial support.

[Clearly the club’s finances would be transformed if they get into the play offs and win promotion, but the odds are quite long.  WG]