Notwithstanding last Sunday’s defeat to Manchester City in the FA Cup semi-final, it’s fair to say that Nottingham Forest have been this season’s surprise package.
Guided by the experienced Portuguese Nuno Espirito Santo,
who replaced Steve Cooper as manager in December 2023, they are still
challenging for a place in the Champions League, which very few pundits (if
any) predicted before the season started.
The magnitude of their improvement can be seen by looking at
the chairman’s comment on 2023/24, when the club was basically happy to simply
“secure its divisional status for the second year running”.
Forest should be congratulated on the significant progress
made since Evangelos Marinakis became the club’s majority shareholder in May
2017. The Olympiacos owner has an 80% stake with the other 20% held by his
associate Sokratis Kominakis.
When the Greek businessman arrived, Forest had just finished
a lowly 21st in the Championship, only avoiding relegation to League One on
goal difference, but there has been steady improvement since then, first shown
by promotion to England’s top flight in 2021/22, when they defeated
Huddersfield Town in the play-off final, then a rise up the Premier League.
Forest swung in 2023/24 from a £67m pre-tax loss to a £12m
profit, which represented a £79m turnaround in just 12 months, largely due to a
significant increase in profit from player sales, which shot up from only £3m
to £101m.
Revenue
In addition, revenue rose £35m (22%) from £155m to £190m,
which was a new club record, though this was more than offset by a steep
increase in operating expenses, which climbed £49m (23%) from £214m to £263m,
while net interest payable was up £5m (47%) from £10m to £15m.
All of Forest’s revenue streams were higher, most notably
commercial, which virtually doubled from £15m to £30m, and player loans, rising
£11m from £4m to £15m. Gate receipts were up by around a third, increasing from
£11m to £14m, while broadcasting rose £5m (4%) from £125m to £130m. Forest’s revenue has really taken off in the
Premier League, so is now more than six times as much as the £30m they
generated in their last season in the Championship.
Despite the steep increase, Forest’s £190m revenue was still
in the bottom half of the Premier League last season, just behind Crystal
Palace. To place this into perspective
(and underline how well Forest have performed this season), this was less than
half of any of the clubs in the Big Six, while Manchester City’s £715m was more
than half a billion pounds higher. It
was also a fair way below some other aspirational clubs, such as Newcastle
United £320m, Aston Villa £276m and West Ham £270m.
Of course, if Forest do manage to qualify for the Champions
League, that would turbo charge their revenue. Such a feat seemed very unlikely
before the season kicked off, but is now a distinct possibility, with chances
improved by the Premier League gaining a fifth spot, thanks to the performance
of English clubs in Europe this campaign.
For example, so far this season English clubs in the
Champions League have earned an average of just under £80m in TV money alone,
ranging from Arsenal £99m to Manchester City £64m.
Player sales
The main reason for the significant improvement in Forest’s
bottom line was £101m profit from player sales, which was up from less than £3m
in the previous season. This included
the £47.5m sale of Brennan Johnson to Tottenham in the summer of 2023, which
represented pure profit, as the Welsh forward was an academy product.
To a large extent, the strategy of retaining talent, first
to drive promotion, then to increase the chances of staying up, has been
vindicated. However, it is likely that player trading will play a key part in
Forest’s business model going forward, especially given the significant value
of players like Murillo, Gibbs-White and Elanga.
Forest have hardly made any money from player sales to date
this season, with the only meaningful departures being Joe Worrall to Burnley
and Remo Freuler to Bologna, both for fees less than £5m.
It would therefore be no great surprise if Forest were to
again make some player sales before the end of June, so that they can be
included in the 2024/25 accounting period. Otherwise, they will surely once
again post an overall loss.
Last season was the first time that Forest had been
profitable since Marinakis arrived, though the owner has still had to bear £164m
of losses, including a hefty £113m in the two previous years alone. They have bucked the trend here, as clubs
promoted to the Premier League normally make money in their first season in the
top flight, only to post a loss in the second season, while it has been the
other way round for Forest.
Forest’s average attendance increased from 28,808 to 29,363,
so has grown by around 3,600 since promotion. In fact, this was nearly 50% more
than the 19,676 Championship low in 2015/16.
The last time that Forest enjoyed crowds of this level was almost 50
years ago in 1978/79, the season when they won the European Cup for the first
time under the late, great Brian Clough.
Forest upset their fans with a hefty 20% ticket price rise
in 2023/24, followed by another chunky increase averaging 24% this season. The
board’s view was that Forest’s tickets remained “amongst the very cheapest in
the division”, describing them as “the most affordable in the league”. They also
pointed to one of the undesirable consequences of the league’s financial
targets, “It is imperative that the club continues to grow financially in order
to remain competitive, particularly in light of the forthcoming squad cost
ratio rules, which will cap spending as a percentage of club revenues.”
There must be some sympathy for clubs like Forest that
struggle to compete financially with the elite, especially in a PSR
environment. For some context, their match day revenue per game of £0.6m is one
of the lowest in the Premier League, miles below the likes of Manchester
United, Arsenal and Tottenham, who all generate more than £5m.
There is a decent chance that work on the redevelopment of
the Peter Taylor Stand could start during the 2025/26 season. Any stadium development would require
planning permission, after which the club could buy the freehold for the City
Ground from the council for a reported £8m-10m. In addition, Forest would have
to pay for infrastructure improvements, as well as compensation to the local
boat club, whose clubhouse would have to be relocated.
Wages
Forest’s wage bill rose £21m (15%) from £145m to £166m,
which was (you guessed it) a new club record, as they continued to invest to
ensure that they could attract elite talent to compete in the Premier League. Wages have nearly tripled since promotion,
rising from £59m in the Championship, including a hefty £21m bonus payment.
There would also have been survival bonuses in the Premier League.
Following this growth, Forest’s £166m wage bill was ninth
highest in the Premier League, ahead of more established clubs like West Ham,
Everton and Brighton. They found
themselves only behind the Big Six, Aston Villa and Newcastle United, but there
was a sizeable gap, e.g. five clubs paid more than £300m, led by Manchester
City £413m, Liverpool £386m and Manchester United £365m.
To underline how much Forest pushed out the boat, their
£145m wage bill in 2022/23 is the highest ever for a club in the first season
after promotion to the Premier League, ahead of Fulham’s £139m the same season.
This can partly be attributed to inflation, but it is still quite striking.
Debt and funding
Forest’s gross financial debt in the football club increased
by £14m from £82m to £96m, comprising £84m other loans and a £12m bank
overdraft.The amount owed in the parent company, NF Football Investments
Limited, is much larger, rising from £141m to £207m.
Forest’s debt would have been much higher without Marinakis
converting £187m debt to equity in the last seven years, including £82m last
season. In addition, £73m of loans have been written-off by the owners in the
last nine years. Forest took out an
additional £116m of debt since these accounts closed, though this included the
refinancing of £55m of existing debt, so a net increase of £61m.
Since his arrival, Marinakis has pumped £127m into Forest,
while another £116m has come from third party loans. The majority of this money
has been used to cover £125m of operating losses with another £91m spent on
player purchases (net), £25m on improving infrastructure and £14m interest
payments.
Indeed, various owners have provided £276m of funding since
2006: Marinakis £127m, Fawaz Al Hasawi £88m and Nigel Doughty £61m. Marinakis
has averaged £18m a year.
Forest will probably face another challenge if they qualify
for Europe, due to Marinakis also owning Greek club Olympiacos. UEFA’s rules
state that “no individual or legal entity can have control or decisive
influence over more than one club competing in the same European competition.”
As we have seen recently, the cards are stacked against any
promoted club, especially if they have spent many years outside the Premier
League, so Marinakis could justifiably claim to have had the last laugh – even
though his gamble could equally have backfired.
That said, last season’s profit was only thanks to the
substantial profit from player sales, which is unlikely to be the case every
year, and would almost certainly be an unwelcome occurrence, as it would imply
losing a top talent.
However, Forest have clearly punched well above their weight
this season. If they do manage to put the icing on the cake by qualifying for
the Champions League, their revenue would really take off.
To paraphrase the excellent documentary about Forest’s two
unlikely European Cup triumphs, do you believe in miracles?
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