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Ownership boost but Swans face many challenges

After a few years of relative obscurity in the middle region of the Championship, Swansea City’s name has featured prominently in the sports pages recently after the arrival of a couple of famous new investors.

First up was Ballon d’Or winner Luka Modrić, who said, “Swansea has a strong identity, an incredible fanbase, and the ambition to compete at the highest level.”  He has been joined as a minority owner by the American rapper Snoop Dogg, who commented, “The story of the club and the area really struck a chord with me. This is a proud, working-class city and club. An underdog that bites back, just like me.”

Swansea’s owners believe that such celebrity partnerships will help boost the club’s global profile, describing the investment as “an endorsement of the club’s ambition and vision”.  More tangibly, this a clear attempt to help drive commercial growth, in much the same way as Hollywood’s Ryan Reynolds and Rob McElhenney have done for Wrexham, another Welsh club.

Swansea had been owned by an American consortium since July 2016, when Jason Levien and Stephen Kaplan bought a controlling interest in the club, but they sold their 65% stake to three other existing shareholders, namely Andy Coleman, Brett Cravatt and Nigel Morris, who were joined by Jason Cohen, a business associate of Cravatt’s.

According to the club website, Coleman, Cravatt and Cohen now own 77.4%, while Morris has 14.0%, leaving the Supporters Trust with 7.6%. Coleman is also an investor in MLS team DC United, Cravatt and Cohen have a private equity firm, while Morris is a US-based British businessman (with Welsh heritage).

The precise terms of the deal are not known, but it is fair to say that Levien and Kaplan have “taken a bath” on their original investment, which valued Swansea City at a hefty £110m.

To put it bluntly, Swans’ fans will probably be glad to see the back of the previous owners, as they failed to deliver on their promises, instead presiding over the club’s relegation from the Premier League in 2017/18.

This followed a more than decent seven seasons in the top flight, which included twice finishing in the top ten, while they actually qualified for the Europa League after winning the League Cup in 2012/13.  The club did come close to promotion, twice reaching the play-offs under Steve Cooper in 2019/20 and 2020/21, but since then it has been mid-table mediocrity all the way.

Swansea’s pre-tax loss reduced from £17.9m to £15.2m, mainly because profit from player sales rose £6.0m from £4.5m to £10.5m.  However, revenue was largely flat at £21.5m, while operating expenses increased by £4.1m (9%) from £42.9m to £47.0m, though net interest payable fell £0.7m from £1.2m to £0.5m.

Swansea’s small £0.1m revenue decrease was due to commercial dropping by £1.6m (16%) from £9.4m to £7.8m, though this was largely offset by increases in both broadcasting, up £1.0m (12%) from £8.7m to £9.7m, and match day, up £0.5m (13%) from £3.5m to £4.0m.

Swansea’s £15.2m pre-tax loss was pretty much par for the course in the Championship, where the vast majority of clubs lose money. No fewer than nine clubs lost more than the Swans in 2023/24, led by Leeds United £61m, Ipswich Town £39m and WBA £34m.

Player sales

Swansea have often attempted to cover at least some of their operating losses with profits from player sales and 2023/24 was no exception, when they generated £10.5m, which was more than twice as much as the prior year’s £4.5m.

Their profit from player sales was £56m in the last five years, which was significantly lower than the £138m generated in the preceding 5-year period.   It will be no better in the 2024/25 accounts after the club said that its sales proceeds were only £3.0m, mainly Matt Grimes to Coventry City, Nathan Wood to Southampton and Azeem Abdulai to Leyton Orient.

Swansea have lost money every season since 2020/21, including a hefty £46m in the last three years. In fact, they have lost money in five of their six years in the Championship.

The root cause of Swansea’s financial issues is, of course, relegation. Since they dropped out of the Premier League in 2017/18, annual revenue has fallen by an incredible £105m (83%) from £127m.  The reduction is very largely due to significantly lower TV money in the Championship (a £96m decrease), though commercial and match day were also down by £6.6m and £3.4m respectively, both falling by 46%.

Swansea have also benefited from parachute payments in the past, receiving £92m between 2018/19 and 2020721, which has effectively been wasted.   Like all other non-parachute clubs in the Championship, the Swans have struggled to compete since these ended.

Swansea’s £4.0m match day revenue was actually the second lowest in the Championship, only ahead Rotherham United’s £2.9m. This was less than a quarter of the recently relegated clubs, namely Leeds United £31m, Leicester City £18m and Southampton £16m.

Swansea’s crowds continued to fall, dropping from 16,821 to 16,574 in 2023/24, with a further decrease to 15,379 last season. This was over 5,000 lower than the 20,600 that they consistently attracted in the Premier League.

In fact, Swansea’s 16,821 average attendance in 2023/24 was one of the smallest in the Championship, only above Millwall, Plymouth Argyle, Blackburn Rovers and Rotherham United.  For more perspective, this was less than half of Sunderland 41,028 and Leeds United 35,989.    There are economic challenges in Abertawe’s catchment area, but that also applies to Sunderland.

Wages have been cut by 72% (£72m) since the Premier League peak of £99m seven years ago, first falling after relegation to the Championship, then further decreasing after parachute payments stopped.   As a result, Swansea’s £27.3m wage bill was in the bottom half of the Championship, just behind their Welsh rivals Cardiff City £27.9m.

Swansea’s gross financial debt was cut from £12.0m to just £4.2m, made up of £3.7m owed to group undertakings and £0.5m finance leases. The loans from Fasanara Securitisation £4.0m, Macquarie Bank £2.7m and the EFL £1.6m were all repaid during the year.  Debt was as high as £35.7m in 2022, but has been greatly reduced after various repayments and the conversion of £14.1m of owner debt into equity.

Swansea are not alone in requiring money from their owners to stay afloat, but they have needed more than most. In the two years up to 2023/24, their £58m funding was one of the highest in the Championship, only surpassed by five clubs, including three that have some of this perioed in the Premier League.

Unless Swansea can significantly grow revenue, any attempt to build a sustainable business model implies some tough cost cutting, but that would make it even more difficult to mount a promotion challenge.

That said, the Swans showed improved form at the back end of the season, so the feeling around the club is more positive than it has been for a while. Whether that will be enough to consistently deliver good results on the pitch remains to be seen.

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