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Profit to loss at Norwich

The authoritative Swiss Ramble reviews the latest accounts of Norwich City.  They swung from £21m pre-tax profit to £24m loss (£18m after tax), despite revenue surging from £57m to club record £134m following promotion to the Premier League, as profit on player sales fell £60m to zero and operating expenses rose £66m (69%) in the top flight.    Only two English clubs have to date published accounts for 2021/22, but rge £24m pre-tax loss is pretty much the norm for the Premier League.

Given the impact of COVID, the Canaries have done very well to break-even over the last 3 years (2020 £2m profit, 2021 £21m profit & 2022 £24m loss). As a rule, this “yo-yo” club tends to be profitable in the Premier League, but loses money in the Championship.

The club’s business model is fairly dependent on player sales, where they have made an impressive £158m profit in the last 8 years, including £60m in 2021 and £48m in 2018, mainly due to the big money sales of Maddison to Leicester and Murphy to Cardiff City.

Revenue

Main driver of the £77m revenue growth was broadcasting, up £53m from £49m to £102m, due to more lucrative Premier League deal, though commercial also grew £13m to £21m, while match day was up £11m, due to return of fans to the stadium. Other income included £6.4m player loans.

Despite the significant increase, the £134m revenue was still one of the lowest in the Premier League, even though other clubs’ 2020/21 results were impacted by COVID. As Executive Director Zoe Webber said, “We competed against bigger spending clubs with more resources.”

The Swiss Ramble estimates that the club lost £30m revenue in the previous two years due to the pandemic, split £10m in 2019/20 and £20m in 2020/21.

The club made nothing from player sales, compared to £60m the previous season, which included club record sale of Emi Buendia to Aston Villa. Unsurprisingly, one of the lowest player trading results in the Premier League.

As they were relegated after just one season in the Premier League, they only get two years of parachutes (instead of the full three years). Details not published by Premier League for a while, but in 2019/20 a relegated club received £42m in year one and £34m in year two.

Average attendance of 26,650 was slightly less than the last time they were in the Premier League in 2019/20 and was one of the lowest in the top flight.

Following promotion the wage bill rose £51m (77%) from £67m to club record £118m, significantly higher than the £89m the last time the club was in the Premier League. Prior year inflated due to promotion bonuses, but only covered 11-month accounting period.  Despite the club record,  £118m wages still very much in the bottom half of the Premier League, less than a third of Man United £384m.

Following the big increase in revenue following promotion, the wages to turnover ratio improved from 117% to 88%, though this was one of the highest in the Premier League. It was only surpassed by Everton and Crystal Palace (both 95%), and their figures were for a COVID-impacted season.

The £48m gross transfer spend in 2022 was almost as much as the previous three years combined. However, £113m gross spend in last five years was actually less than preceding five years £119m.

Gross debt increased from £29m to £70m, including two loans secured on future income: (a) £44m on TV rights at 5.75%, repayable by March 2024; (b) £23m on TV rights at 5.6%, repayable by September 2024.  Even after the steep increase, £70m debt was relatively small for the Premier League.

In the last 10 years the club have generated £85m cash, including £51m from loans and £23m from operating activities. Most of this has gone on players £44m (net), infrastructure £29m and interest payments £10m.

After these accounts American Mark Attanasio, owner of baseball team Milwaukee Brewers, invested in the club. He bought Michael Foulger’s minority 15.9% stake and provided £10m funding in exchange for preference shares.

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