Norwich now look more like combine harvesters than tractors

An extraordinary general meeting agreed this month that majority control  of Norwich City will pass to Michael Attanasio’s Norfolk Holdings group from Delia Smith and Michael Wynn Jones after their 28 years at the helm.

Attanasio, the owner of American baseball team Milwaukee Brewers, first purchased a minority 22% stake from former director Michael Foulger in September 2022, before increasing his shareholder to 40% in April 2024.

From March 2025 Attanasio will convert his loans into equity, giving him 85% of the football club. Smith and her husband will retain 10%, while the remaining 5% will be owned by independent shareholders, including the supporters’ group, The Canaries Trust.

The board emphasised that this transaction “involved no payment to Delia and Michael”, thus “securing the long-term financial security of the club and an effective and positive transition”. Clearly, Norwich City owe a huge debt of gratitude to the former owners, so it feels only right that they have been appointed as Honorary Life Presidents.

So what is the financial situation that Attanasio has taken on?

Norwich have long been regarded as a club that tries to operate sustainably, posting a profit in seven of the ten seasons up to 2020/21. However, they have lost money in all three years since then, adding up to £65m over that period.

This is mainly because they loosened the purse strings, investing a relatively large amount in the squad, both in terms of transfers and wages. That said, their £14m loss in 2023/24 was much better than the previous two seasons.

Norwich City’s pre-tax loss almost halved from £27m to £14m, mainly because profit from player sales significantly increased from £4m to £13m. Revenue only fell £3m (3%) from £76m to £73m in their second season in the Championship after relegation, while operating expenses were cut £7m (7%) to £94m.  However, net interest payable further increased from £6.1m to £7.4m, due to higher debt funding.

Norwich’s £73m revenue last season was their third highest ever in the Championship, below the previous year’s £76m and also £75m in 2016/17.  It has dropped £61m (45%) from the club record £134m two years ago in the Premier League, almost entirely due to the lower TV rights deal after relegation.

Norwich have often benefited from high revenue, having three of the five highest ever recorded in the Championship. In fact, their £76m in 2022/23 has only been surpassed by Newcastle United’s £86m in 2016/17. Therefore, it is not surprising that Norwich have managed to bounce back to the top flight so often.

They also benefit from being the ‘stand alone’ league club in a largely prosperous county.  Norwich’s average attendance fell slightly to 26,104, which was only 3% lower than the 27,005 peak in the Premier League. The club said that it had more than 21,000 season ticket holders (including hospitality).

 

The main driver of Norwich’s revenue decrease was broadcasting, which fell £4m from £49m to £45m, as the parachute payment was lower in the second year after relegation from the Premier League.

The good news is that there were increases in both the other revenue streams, particularly gate receipts, which rose £1.3m (13%) from £10.0m to £11.3m, while commercial was also slightly up from £17.0m to £17.1m.

Norwich are the only Championship club that has to date published accounts for 2023/24, but we can see that their £14m pre-tax loss is not out of the ordinary in this division, looking at the other clubs’ results from the previous season.

To place this into perspective, no fewer than six clubs lost more than £20m in 2022/23, namely Burnley £36m, Sheffield United £31m, Birmingham City £25m, Bristol City £22m, Blackburn Rovers £21m and QPR £20m.

Player sales

Norwich’s smaller loss last season owed much to player trading, as profit from player sales significantly increased from £3.6m to £13.4m.

The gain was boosted by the “pure profit” they achieved from the sales of academy products, Andrew Omobamidele to Nottingham Forest and Max Aarons to Bournemouth, while they also got a decent fee for Milot Rashica’s transfer to Besiktas.

This was towards the upper end of the Championship, where most clubs make very little from player sales. The only clubs that did better than Norwich in the previous season were Watford £59m, Middlesbrough £22m, Stoke City £15m and Hull City £15m.

Norwich’s business model is fairly dependent on player sales, which have delivered an impressive £175m of profit in the last ten years.  However, the performance has been a bit patchy with the majority of that gain coming in only two seasons: £60m in 2020/21 and £48m in 2017/18. Indeed, they have made less than £4m in four of the last six seasons.

Norwich received a £39m parachute payment last season, which was £4.5m less than 2022/23. They were helped by the fact that 2023/24 was the first year of a new TV rights cycle, otherwise the second year payment would have been only £35.6m.   In total, their parachute payments since 2014/15 add up to an incredible £224m, having been relegated four times in that period.  In fairness, they have made pretty good use of these funds, as they have also been promoted back to the Premier League on three occasions.

As Norwich were relegated after just one season back in the top flight, they only received parachutes for two years (instead of the full three years), so they will get nothing this season.

Wages

Norwich’s wage bill was cut £4.6m (8%) from £56.4m to £51.8m, so this has more than halved from the club record £118m. This is also a lot less than the £67m Championship high in 2020/21, but that was inflated by a promotion bonus.

Despite the reduction, Norwich’s £52m wages are still among the highest in the Championship. In 2022/23 they were only surpassed by Burnley’s £54m, though the Swiss Ramble would expect them to be overtaken by some clubs when all 2023/24 accounts are available, e.g. those recently relegated from the Premier League and promoted clubs, whose reported wages will include hefty promotion bonuses.

Nevertheless, it is clear that Norwich have pushed the boat out in the past few years regarding investment in the squad, though the results have been fairly disappointing.   Furthermore, although Norwich’s £56m wage bill in 2022/23 is far from being the most paid in the Championship, it is actually the fourth highest for a club that did not secure promotion, only behind Aston Villa (twice) and Bournemouth.

Norwich’s 71% wages to turnover ratio is actually one of the best ratios in the Championship, where the vast majority of clubs have unsustainable ratios well above 100%.

Norwich’s £84m gross debt was nowhere near the highest in the Championship, as it was a long way below the likes of Middlesbrough £159m, Birmingham City £149m, Blackburn Rovers £142m and Stoke City £122m (all figures from June 2023).   As a result of the higher debt, Norwich’s interest payment increased from £5.0m to £7.4m. This was only £0.6m three years ago, so the annual burden has significantly grown.

In the couple of years since Attanasio arrived, there has been a clear change in the funding model, as the £84m of available cash was very largely provided by the shareholders in the form of capital, loans and preference shares.

This was mainly used to repay £51m external loans, while there was £12m of interest payments. They also invested £10m in infrastructure and used £6m to cover operating losses. Only £5m (net) went on player purchases.

Over the years Norwich’s shareholders had put hardly any money into the club, though that changed after Attanasio started building up his stake. As a result, the owners have provided £80m in the last two years: loans £66m, preference shares £10m and share capital £5m.

As a result, Norwich have become one of the Championship clubs that benefits most from owner benevolence. Even before last season’s cash injection, looking at the two years up to 2023, they had the fourth highest funding in the division, as their £47m was only behind Cardiff City £54m, Birmingham city £53m and QPR £47m.

At the recent AGM, Attanasio said that he will have failed if Norwich do not win promotion back to the Premier League within five years. This has not actually proved a problem in the past, though it has been rather more difficult to stay up.

It should also be acknowledged that life will be more difficult for the Canaries now that the parachute payments have ended.

As a result, Norwich will have to focus on player trading to balance their books, even though Attanasio could also cover any shortfall, bearing in mind that the club will have to be conscious of PSR regulations.

I have a couple of friends who support Norwich and I have enjoyed holidays in Norfolk, so I wish them well.   There were limits to what could be achieved under Delia, but with the new ownership they look more like combine harvesters than tractors.