The authoritative Swiss Ramble reviews the latest accounts of Burnley FC.
In December 2020 a majority (84%) shareholding in Burnley
was sold to Calder Vale Holdings Ltd, in turn owned by Velocity Sports Ltd with
Alan Pace the ultimate owner, though long-term local owners Mike Garlick and
John Banaszkiewicz remain at Turf Moor as directors.
The Clarets had been debt-free for many years, but the new
owners put in very little of their own money, instead acquiring the club via a
leveraged buy-out, placing £65m debt on the club (from MSD Holdings) &
using £37m of club’s own cash balances, similar to the Glazers.
Although the £65m
loan is only due to be repaid in December 2025,that depends on the club remaining
in the Premier League. If Burnley do not avoid the drop, a “significant
proportion” has to be repaid shortly after relegation with more due if no
immediate promotion.
This has
understandably caused concern among supporters, as this would likely mean
having to offload some of their better players to fund the repayment and
potentially dip into parachute payments, though the club says it would retain
the support of its lenders.
Effects of relegation
Relegation would
obviously severely impact club finances, with the normal steep decrease in TV
money exacerbated by the requirement to repay a significant slice of the MSD
loan, so a fire sale of players is likely, made more difficult with many out of
contract this summer.
If they are relegated, their TV income will fall
significantly, albeit cushioned by a parachute payment (£42m in 2019/20), which
would give them much higher revenue than most other Championship clubs. Parachutes
fall to £34m in year two and £15m in year three.
If do go down, the club has advised that there will be a
significant reduction in wages, largely due to relegation clauses in player
contracts. That said, this season will include the once-off payment for manager
Sean Dyche’s dismissal.
It’s not difficult to understand why Burnley were acquired,
as they were in very good shape financially, but there are big questions about
the new ownership. Given the implications of relegation, little wonder that
Pace said, “It is very important to be in the Premier League.
Despite this sword of Damocles hanging over them, Burnley finances
did not look too bad, as pre-tax loss was only £3m in a year badly impacted by
COVID. This was one of the better
results in the Premier League, as many clubs had huge losses.
Revenue
Revenue dropped £19m (14%) from £134m to £115m, while profit
from player sales also fell £10m to £5m, but this was largely offset by £28m
(18%) reduction in operating expenses, though the new debt drove a £2.8m
increase in net interest payable.
Revenue fell for the third year in a row, so 2021 £115m is
£24m (17%) lower than the club record of £139m in 2018. This is due to a
combination of the pandemic and worse performance on the pitch. Broadcasting is
down £18m, but still accounts for 90% of total revenue
All three revenue streams decreased with the largest fall in
broadcasting, down £9m (8%) to £104m, due to lower finishing position, while
COVID drove reductions in match day, down £4.2m (96%) to just £355k, and
commercial, down £5m (31%) to £11m.
Commercial revenue fell £4.8m (31%) from £15.7m to £10.9m,
mainly due to COVID reducing catering from £2.1m to £115k and other activities
from £11.8m to £9.2m. This was the lowest in the Premier League, though Pace
had targeted this as an area for improvement.
£115m revenue was the lowest in the Premier League, just
below Sheffield United, though this season’s rankings are distorted by
different amounts of revenue deferred from 2019/20 accounts. However, for some
perspective, it was only around a fifth of Man City £570m.
The club said that 2019/20 COVID impact was £10.5m. They did
not quantify this in 2020/21, but the Swiss Ramble estimates another £10.3m
(match income £5.2m, catering £2.5 and other commercial income £2.6m), meaning
a total revenue loss of £21m over the last two years.
Player sales
The profit from player sales fell £10m from £15m to £5m,
mainly Ben Gibson and Josh Benson to Barnsley. It is true that COVID depressed
the transfer market, but this was still miles below Man City £69m, Wolves £61m.
They have rarely made big money from player sales, though
profit increased to £59m in last 5 years against £26m in previous 5-year
period. They have only generated
above £10m three times in the last decade, though this season will be boosted
by the £25m sale of Chris Wood to Newcastle.
This is the first time that Burnley have made a loss since 2016
and the first time ever in the Premier League. In the last seven years the club has generated £104m pre-tax
profit. Losses reported in the Championship in 2014 and 2016 were driven by
promotion bonuses.
Average attendance of 20,268 in 2019/20 (for games played
with fans) was second lowest in the Premier League, only ahead of Bournemouth,
though 3,600 (21%) higher than their last season in the Championship.
Wages
The wage bill
fell £14m (14%) from club high £100m to £86m, partly due to lower bonuses for
worse Premier League finish. Prior year covered 13 months, so would have been
£94m on a like-for-like basis. Wages still up £25m (40%) since first season
after promotion in 2017.
The £86m wage bill was the second smallest in the Premier
League, only above Sheffield United £57m, but £22m below #LUFC £108m . While
the club could be commended for its tight cost control, the flip side is that
low wages make relegation more likely.
The wages to turnover ratio was flat at 75%, though the club
noted that prior year would have been 70% based on 12-month wages, so the
underlying increase was 5%. For many years, one of the better ratios in the
Premier League, but now in top half following revenue decline.
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