Salford can live with big losses

The authoritative Swiss Ramble examines the accounts of Salford City. In the last three years Salford’s had £10.2m negative operating cash flow, having adjusted for non-cash items. They then spent £0.7m on players (purchases £0.9m, sales £0.2m), £1.6m on infrastructure (new stadium) and paid £0.4m interest. This was funded by £12.7m loans from the owners.

Since the Class of ’92 arrived, Salford have lost £15.1m in 7 years, including £14.2m in the last 4 years alone. As the club has progressed up the leagues, the losses have grown, though Gary Neville explained, “It is a lot of money to lose, but we’ve come up from step eight.”

Salford’s £3.2m revenue was below quite a few of their rivals in League Two. Six of the clubs that published details had revenue above £4m, namely Bolton £6.2m, Forest Green Rovers £5.8m, Tranmere Rovers £4.9m, Bradford City £4.5m, Leyton Orient £4.3m and Walsall £4.2m. Salford’s revenue has nearly tripled from £1.2m in 2018 to £3.2m in 2021, which is pretty good going, especially as “the global pandemic caused a significant loss in revenue opportunities”.

Salford have made the highest losses in each of the last four seasons: £4.8m in 2020/21 (League Two), £3.8m in 2019/20 (League Two), £3.6m in 2018/19 (National League) and £2.0m in 2017/18 (National League North).

Gary Neville: “The money that we put in is manageable between the seven of us. We're comfortable with our position. There's no financial pressure (to get promoted), but there is sporting disappointment.”

On the other hand, Salford’s big spending has given them a clear advantage over their rivals. Accrington Stanley owner provided the counter argument “All they do is raise the bar for the rest. Their largess damages those clubs that are trying to operate sustainably.”

Salford’s £15.6m gross debt was the second highest in League Two, though a long way below Colchester United’s £29.2m. That said, it was more than three times as much as the next highest club, Mansfield Town £4.5m.

Salford spent £156k on player purchases in 2020/21, only below Port Vale £180k and Bolton Wanderers £179k. This actually represented a reduction on the prior year’s £281k gross spend, which was second highest in League Two, only surpassed by Mansfield £294k.

Wages

Salford’s wages to turnover ratio increased from 121% to 143%, which was by far the highest (worst) in League Two, ahead of Bolton Wanderers 112%, Leyton Orient 111% and Scunthorpe United 106%. That said, it was better than the 164% in the National League two years ago.

Not all League Two clubs disclose wages in their accounts, but Salford’s £4.5m was third highest of those that do, only surpassed by Bolton Wanderers £6.9m and Leyton Orient £4.8m. Despite the revenue reduction, Salford’s wages rose £0.4m (10%) from £4.1m to £4.5m, which means that wages have increased by nearly 70% since promotion to League Two (up from £2.7m in 2018).

Salford’s commercial revenue (including broadcasting income) has nearly tripled in the last two years from £1.1m in 2018 to £3.0m in 2021. Their shirt sponsorship is with TalkTalk until 2023/24,while Castore replaced Kappa as kit supplier from 2022/23.

Salford’s average attendance steadily rose from 117 in the NPL Division One North in 2013 to 3,022 in 2020 (pre-pandemic), though it fell nearly 30% to 2,152 in 2022, the lowest in League Two. The club’s potential was shown by the record 4,518 crowd for an EFL Cup tie in 2019.

Salford encapsulate some of the governance challenges in football. On the one hand, the club should be applauded for its amazing climb up the leagues. As Gary Neville explained, “We’re trying to build a fanbase in a city that’s not had a Football League club ever.”

After Simon Jordan questioned whether Salford had complied with financial fair play rules, Neville emphasised that the owners put cash in upfront, in line with the League Two Salary Cost Management Protocol (SCMP) guidelines. These state that player-related expenditure should be no more than 50% of revenue plus 100% of the “football fortune”, which includes transfer income, donations and cash/equity injections.

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The Political Economy of Football V2

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