Luton's progress achieved on a very low budget

Luton’s progress has been achieved on a very low budget, as can be seen by a review of their 2021/22 accounts.

Luton’s pre-tax loss widened from £1.9m to £6.4m, despite revenue rising £5.0m (39%) from £12.7m to £17.7m, as profit from player sales halved from £2.2m to £1.1m and there was no repeat of prior year’s £2.9m other operating income. In addition, operating expenses increased by £5.4m (27%) from £19.7m to £25.1m.

Although losing money is rarely good news, Luton’s £6.4m loss was actually one of the best financial performances in the Championship, so they cannot be accused of spending their way to success.

Luton have only posted a profit once in the last decade, £3.4m in 2019/20, but they have restricted losses over this period to less than £16m. This is not too shabby for a club at this level, though the £6.4m loss last season was the highest for some time.

Luton’s revenue has more than doubled since promotion from League One in 2019, rising £10.0m from £7.7m to £17.7m. As recently as 2016, their turnover was only £5.0m.  Broadcasting is the most important revenue stream, contributing 59% of total revenue, followed by match day 28% and commercial 13%.

Even after the steep growth, Luton’s £17.7m revenue is firmly in the bottom half of the Championship, which highlights how well they have done to reach the play-offs two years in a row.

If Luton do win the play-off final, their revenue would be significantly higher in the Premier League. The actual amount would be dependent on the final finishing position in the league, though revenue for clubs promoted in the last six seasons was on average £134m, which would represent a massive £116m increase for the Hatters.  This is driven by the very lucrative TV deal in the top flight, but the club would also expect to see a hefty increase in commercial income, especially sponsorships.

While Kenilworth Road has a lot of old school charm, being surrounded by terraced houses, it is not great from the financial perspective with a capacity of only 10,356.  Therefore, in order to “operate a truly sustainable business model”, the club has plans to move to a new stadium in nearby Power Court, which will significantly increase capacity and corresponding revenue.  The detailed design is now complete, reportedly increasing the capacity to 17,500, though this could be expanded to 23,000 if promotion is achieved.

The stadium move would not take place before the 2025/26 season, so in the short-term Kenilworth Road would have to be brought up to Premier League standards if Luton do go up, which would cost them £8-10m.

Despite the 2021/22 growth, Luton’s £2.3m commercial revenue is still one of the lowest in the Championship, only ahead of Blackpool and Hull City. To further place this into perspective, it was miles below the likes of Stoke City £16.6m and Bristol City £15.8m.

Luton’s wage bill rose £3.7m (26%) from £14.1 m to £17.8m, mainly because of the team’s improved performance, which translated into higher bonus payments, and the return of the match day workforce. Wages have more than doubled from £7.9m since promotion from League One in 2018/19.

Even after this growth, Luton’s £17.8m wage bill is still very much on the low side in the Championship, obviously much smaller than clubs benefiting from parachute payments, e.g. Fulham £90m, Bournemouth £61m and WBA £42m.  In fact, there were only four clubs with lower wages than Luton, though this did include the other play-off finalists Coventry City.

Luton spent £2.8m on player purchases in 2021/22, which was not a huge amount, but was actually as high as mid-table in the Championship, because many clubs cut back on transfer expenditure after the pandemic.   This season’s transfer spend is likely to be a bit higher, including the £2m reportedly splashed out on club record signing Carlton Morris from Barnsley.

Luton’s £5.5m squad cost was still one of the lowest in the Championship, only above Hull City £4.1m and Blackpool £2.5m. This paled into insignificance compared to Fulham £197m and Bournemouth £151m, who were both promoted.

Based on the cash flow statement in the holding company accounts, Luton’s owners have provided the club with £39m since 2015, split between £31m loan notes and £8m capital. This does not include any funding in 2021/22, as we are still waiting for those accounts to be released.

The re-emergence of Luton Town over the last decade is an amazing story, especially as this has been achieved without massive spending. Indeed, the club has one of the lowest budgets in the Championship.