Blackburn face a tough challenge

Blackburn Rovers are one of England's historic clubs and one time Premier League title winners, but the club's fortunes these days are far from easy.

Rovers had to cut back on spending after an Indian government agency prevented Venky’s, the club’s owners, from remitting money to the club, while it queried the application of funds by one of its subsidiaries.

As a result, Venky’s had to apply for special approval to send money, which was granted, thus allowing the owners to provide £11m of funding before Christmas to cover day-to-day requirements, including wages, utilities and suppliers.

Rovers’ pre-tax loss nearly doubled, rising by £9.7m from £11.2m to £20.9m, despite revenue rising £4.4m (26%) from £16.6m to £21.0m, mainly because profit from player sales dropped £9.7m from £10.1m to just £349k.

All three revenue streams increased. Match day led the way, rising £1.6m (50%) from £3.4m to £5.0m, but there was also good growth in commercial, up £1.3m (28%) from £4.9m to £6.2m, and broadcasting, up £1.3m (15%) from £8.4m to £9.7m.

Historic losses

Very few clubs make money in the incredibly competitive Championship, but Rovers’ £20.9m loss was firmly in the bottom half of the division in 2022/23, only surpassed by five clubs.

Rovers’ loss would have been much smaller if they had made decent money from player sales, but profit from this activity was only £0.3m, compared to £10.1m in the previous season, thanks to the big money sale of Adam Armstrong to Southampton.  However, this season will show a considerable improvement, driven by the £18m sale of Adam Wharton to Crystal Palace in the January transfer window. As the talented midfielder was an academy product, that represents pure profit.

Rovers have only once made a profit under the Venky’s ownership, which was back in 2011/12 when the club was last playing in the Premier League (and boosted by £23m player sales).

However, in the last 10 years they have managed to lose £160m, despite benefiting from parachute payments in three of those seasons..

In fairness, losses have reduced since the sizeable deficits in the first two seasons in the Championship, £37m in 2012/13 and £42m in 2013/14, but they have now widened two years in a row.

To place Rovers’ £160m loss in the last decade into perspective, only two clubs in the Championship lost more money during this period, namely QPR and Reading.

Furthermore, the relatively small loss of £7m in 2020/21 was only thanks to the £13m gain arising from selling the senior training ground at Brockhall and associated housing to a company set up by the owners Venky’s (£17m sales proceeds less £4m value in accounts).

Rovers’ average attendance increased from 13,501 to 14,819, which means that this has grown by more than 2,000 since the low in 2016/17. On the other hand, they have lost over 10,000 since the 25,427 that they attracted in the 2009/10 Premier League.  Despite another increase this season to 15,583, this was only above Rotherham United, which highlights one of Rovers’ structural difficulties.

Wages

Rovers’ wage bill rose £1.4m (6%) from £24.4m to £25.8m, which was the club’s highest since its parachute payments stopped. However, wages have been more or less at the same level since promotion from League One five years ago.

Following the increase, Rovers’ £26m wage bill was 11th highest in the Championship, so it is fair to say that they under-performed last season relative to their budget. As an example, their wages were only a little lower than promoted Luton Town, even though those were inflated by substantial promotion bonuses.

That said, Rovers’ wages were only around half of the clubs benefiting from parachute payments, e.g. Norwich City £56m, Burnley £54m and Watford £49m. They were around the same level as Sunderland and QPR.

Rovers’ 123% wages to turnover ratio was the sixth highest in the Championship last season. This is obviously far from great, but in fairness around half of the clubs in this very competitive division suffer from unsustainable ratios well above 100%.

Rovers spent £4.8m on player purchases in 2022/23, which was four times as much as the previous season’s £1.2m. This was mainly on Sammie Szmodics from Peterborough United, Dom Hyam from Coventry City and Callum Brittain from Barnsley.

Debt and reliance on owners

Rovers’ gross financial debt fell £21m from £163m to £142m, largely due to Venky’s converting £21.7m of debt into shares, thus reducing the amount owed to the owners from £144m to £123m.  Rovers’ £142m debt was actually the third highest in the Championship, only below Middlesbrough £159m and Birmingham City £149m. In fact, they actually had the 12th highest debt in the whole of England at the end of the 2022/23 season.  However, it should be noted that the Venky’s loans are interest-free with no fixed date for repayment.

Since Venky’s bought the club, they have effectively been Rovers’ only source of funds, contributing £177m of the £189m available cash in the last 13 years. The remaining £12m came from £5m of external loans, £5m (net) from player trading and a £2m decrease in the cash balance.

Therefore, the club has been heavily reliant on the owners to cover its £176m operating losses since 2011. It also made £8m interest payments, but only invested £6m in infrastructure.

The £177m that Venky’s have put into the club means that they have basically signed a cheque for £14m a year ever since their arrival at Ewood Park.

After reducing their funding in 2016 and 2017, which arguably led to the relegation to League One, they had returned to former levels before last season’s restrictions led to a severe drop-off.

Rovers’ fans must be asking exactly what Venky’s get out of this arrangement. The owners’ funding has been invaluable, but the other side of the coin is they have made more than a few mistakes over the years, while their ambition seems fairly limited.

There also has to be a concern that the situation with the funding from India is still not completely resolved, notwithstanding the reassuring noises from the club.

After the encouraging performances in 2021/22, when they only missed out on a place in the play-offs on goal difference, Rovers’ 19th place finish last season was a major disappointment.

In fairness, this was a bit of a lost year after the Indian government restricted Venky’s ability to fund the club, so Rovers were unable to invest much in the squad.

This is important, as Rovers’ relatively low revenue means that they will always face a tough challenge in the Championship, competing against clubs with much higher spending power, especially those benefiting from parachute payments.

This season’s accounts will benefit from the sale of Adam Wharton to Crystal Palace, but it would still not be a huge surprise if top scorer Sammie Szmodics were also to leave this summer.