Video: Norwich City’s ‘healthy’ finances set up club for January spending
PUBLISHED: 10:45 25 October 2014 | UPDATED: 09:09 27 October 2014
Archant ï¿½ 2014
Norwich City manager Neil Adams will be given the financial firepower to buy new players in the January transfer window after the club was handed a clean bill of health in its annual accounts.
Norwich City revealed that it took a £4.5m hit at the end of last season after certain members of the squad were not available to play.
The club faced costs after some players contracts were classified as ‘onerous’ – a term used to describe a deal where the club is not recouping economic benefits from a player despite honouring the terms of their contract.
Speaking about this year’s annual accounts, David McNally said it was “right and proper” for all players at the club to have a relegation clause in their contract, which lead to salaries being reduced if the club was relegated to the Championship.
It is understood that the club recently saved about £9m from not having to pay Premier League success bonuses.
The chief executive added: “If ever you have been in a business where your salary has been reduced by 40pc that has an impact on your money and on you psychologically.
“We have done a lot of work since relegation on changing things here psychologically and operationally to ensure that the issues that surround relegation were accepted dealt with were removed from the football club, so if anybody on the playing staff could not accept that we are now playing in the Championship, or in the backroom team, or in the commercial team, they are no longer here because we need everyone working harder than last year if we are able to achieve the aim of getting back into the Premier League.”
Record signing Ricky van Wolfswinkel left the club on loan to French club St Etienne, while central defender and former team captain Sébastien Bassong joined Watford on loan.
Meanwhile, the club recently sold players Robert Snodgrass, Anthony Pilkington, Leroy Fer and Andrew Surman.
Chief executive David McNally said money saved from selling players in the summer would be used to support the manager in his quest to bring in new talent and mount a quick return to the Premier League.
But he said the club would have to be “more nimble on its feet” when it came to new signings, as it looks to cope with an approximate £45m income drop sparked by relegation.
It came as the club revealed significant revenue and profit gains to June 30 2014, as revenues climbed £16.8m to £95.5m and profits after tax rose from 0.5m to £6.7m this year.
City on Financial Fair Play
Norwich City Chairman Alan Bowkett said: “Our club policy with regard to the Football League recommendations are that Championship clubs going up –and Premier League clubs– should include within the standard professional footballer’s contract a 40pc clause reduction in salary when being relegated from the Premier League to the Championship.
He added: “I think it is very important that if Financial Fair Play is to work in the Championship and the Premier League that there is a salary structure that allows Championship clubs to perform without having a billionaire investing a million every year to ensure they have a competitive football squad.
Norwich City chairman Alan Bowkett said it was able to improve profits because both the players – and many management and backroom staff – did not receive success bonuses for staying in the Premier League.
However, the improved fiscal picture – which included no external debt going into the Championship this year – means it has paid a £2.5m corporation tax bill.
Club’s hotel link
Norwich City faced no financial impact when a joint venture company linked to the club called in the administrators last year.
Kerrison Hotel – the company behind the Holiday Inn Norwich City Hotel at Carrow Road – went into administration on November 7, 2013.
However, the club did not suffer as a result of the fallout because the terms of its agreement meant it would only receive money if the company made a profit.
The club’s accounts ending June 30, 2014 state that the administration of the joint ventre led to the loss of joint control of the company.
It added: “Having taken advice, the directors have determined that no contractual liability to fund the joint venture’s losses in such a situation exits.”
Mr McNally said that while much was made about the money lost by clubs when relegated to the Championship, Norwich City had a “healthy” turnover which would remain one of the largest in the Championship.
“The reality is that in the Championship our forward sales will be down by £45m approximately, our turnover very roughly halves, which has a huge impact on our ability to carry out business,” he said. “Clearly the fact that we ended the year positively from a financial point of view is a help. We would prefer to be in the Premier League and having to pay out the bonuses.
“What we then do is that we have got the cash and we sit down with the manager and decide how best we can equip him to try and get promoted at the first time of asking and that’s the objective, and we develop the squad with that in mind.
He added: “We’ve had to trade some players out. Thankfully all of the players we have sold have been sold at a profit, which frees up some cash to bring players in. Of course the ideal is to bring in better players than those leaving the club, albeit with less cash to trade.”
Last October, the club recorded an increase in revenues to £78.7 million and handed former manager Chris Hughton £24.2m to spend on players in the summer transfer window.
Speaking about this year’s annual accounts, Mr Bowkett said: “It’s a rather unusual and difficult situation to report our profit before tax up £6m, which I was not expecting to be reporting because we were planning to roughly break even in the Premier League. And the reason that we are profitable is because we failed to stay in the Premier League and therefore player bonuses for staying in the Premier League were not due.
“Now, the only advantage of that is it helps us in our campaign for this year, but I would far rather be reporting a break even situation and us remaining in the Premier League.”
He added: “Our total revenue was up over 20pc and the vast proportion of that is our Premier League TV income being £23m higher than the previous Premier League income.
“Down from that we received £4m less from the Premier League for merit awards because we finished 18th rather than 11th.”
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