Blue sky appears over Coventry

It was cloudy first thing this morning in Warwickshire, but now patches of blue sky have appeared, providing an analogy for the recovery of Coventry City.

This is the first set of accounts under Coventry’s new owners, after local businessman King purchased the club in January 2023, initially through the acquisition of an 85% stake and then buying the remaining 15%.

The previous owners, London-based hedge fund SISU Capital, had saved the club from administration in 2007, but came under fire from many supporters for their penny pinching approach in subsequent years.

Coventry swung from a £4.9m pre-tax loss to an £8.7m profit, mainly thanks to a huge improvement in profit from player sales, which shot up from just £2.4m to £23.7m, though revenue also rose £8.9m (44%) from £20.4m to £29.3m. Last season’s profit bucked the trend, whereby Coventry had posted losses four years in a row. This was only the second time that they reported a profit in in the last 10 years – and the last occasion was just £13k in 2018/19.

However owner King sounded a note of caution, “These financial results are flattered by the high-profile sales of two outstanding players and the incredible FA Cup run that ended so dramatically and heartbreakingly at Wembley.”

Indeed, significant investment in the squad and club infrastructure led to a steep rise in operating costs, which rose £16.3m (58%) from £27.9m to £44.2m, though net interest payable was cut from £2.4m to zero.

All three revenue streams increased, led by commercial, which more than doubled from £4.2m to £9.1m, though there was also decent growth in match day, up £2.8m (40%) from £7.2m to £10.0m, and broadcasting, up £1.1m (12%) from £9.0m to £10.1m.  There is an even mix of revenue streams: broadcasting 35%, match day 34% and commercial 31%.

Following last season’s increase, Coventry’s revenue has more than quadrupled from the pre-pandemic £6.3m in 2018/19 to £29.3m, obviously boosted by the promotion from League One, where revenue was as low as £3.8m in 2013/14.

Coventry’s £8.7m profit is the second best result to date in the 2023/24 Championship, only behind Watford’s £12.8m.  This was an impressive achievement in a division where very few clubs manage to make money. In fact, over half of the clubs reported losses of more than £10m in their most recent accounts, including WBA £33.9m, Stoke City £25.7m and Hull City £18.8m last season.

Player sales boost

Of course, as King observed, Coventry’s excellent result owed a great deal to player sales, where the profit significantly increased from £2.4m to £23.7m, mainly due to the big money transfers of Viktor Gyökeres to Sporting and Gus Hamer to Sheffield United.

This was the second highest gain in the Championship, only surpassed by Watford £29.3m, though decent profits were also generated by Blackburn Rovers £23.6m, Bristol City £21.7m and Middlesbrough £17.1m.  As a rule, few clubs in this division make big money from player trading, the exceptions usually being those that have just been relegated from the Premier League, so all these clubs did well last season.

Coventry’s average attendance significantly increased by 28% from 19,950 to 25,468 last season, which is nearly four times as much as the 6,677 four years ago, largely due to the club returning to Coventry instead of having to play games at St Andrews in Birmingham plus more success on the pitch.

The club has signed a five-year licence agreement to continue playing at the Coventry Building Society Arena (formerly known as the Ricoh) until the end of the 2027/28 season.  However, this agreement means that the club are still tenants, as Mike Ashley’s Fraser group bought the stadium from the previous owners.

Whenever I drive past the training ground in Ryton to visit my eldest daughter, it is evident that investment has produced a more professional set up.

Coventry’s wage bill rose £5.5m (31%) from (restated) £17.9m to a new club record of £23.4m, which was largely from higher player wages as a result of continued investment in the playing squad.This means that wages have nearly quadrupled from £6.5m in League One four years ago. Even after the significant growth last season, Coventry’s £23.4m wage bill was still firmly in the bottom half of the Championship.

From this perspective, it is clear that the Sky Blues have been punching well above their weight, especially if we consider clubs benefiting from parachute payments, who paid much higher wages, e.g. Burnley £54m in 2022/23 and Norwich City £52m last season.  Coventry’s 80% is one of the better wages to turnover ratios in the Championship, as many clubs in this very competitive division have unsustainable ratios well above 100%.

Coventry splashed out £35m on player purchases, which was three times as much as the previous 10 years combined, when the highest outlay was just £3.5m in 2020/21.

Funding

King’s £30m funding in the last two seasons is more than twice as much as the previous ten years put together. Furthermore, almost all of the previous owners’ funding in that decade was back in 2012/13 and 2013/14 with only £3m provided after that – and nothing at all in the last two years of their tenure.

Things have dramatically changed at Coventry City since King arrived on the scene, as reflected in these financial results with the club setting a revenue record, including new highs in all three revenue streams. There was also the rare sight of a profit in the Championship, thanks to big money from player sales.

However, the club still lost money at an operating level, while significant investment in the squad and the infrastructure, which was much required to compensate for the years of low spending under the previous ownership, was only made possible by a sizeable injection of funds from King.

The good news for Coventry fans is that King is clearly ambitious for success, “I’ve put on record that we want to be in the play-off mix in three out of every five years, and hopefully in one of those we sneak through the door. I think that is a realistic ambition.”