Norwich City accounts: transfers were crucial to keeping club afloat
- Credit: Archant
The sale of some of Norwich City's star players was vital in keeping the club financially afloat, its sporting director has said.
Details of NCFC's accounts, published today, reveal the club managed to turn a £2.7m post tax loss in 2016/17 into a £14.6m profit after tax in 2017/18.
That was despite income dropping from £75.9m to £63.7m as a result of lower parachute payments.
City chairman Ed Balls said the profit reflected various cost reductions and transfer money received at the end of the summer.
But he warned the club will be in a 'cash-negative' position by the end of the year due to the end of the parachute payments.
City will also be hit with a £10m tax bill.
Director of finance Ben Dack said this was due the club having to pay VAT on every player it transfers.
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Mr Dack said last year's parachute payments fell from £52m in 2016/17 to £32m in 2017/18 - the last the club will receive.
Parachute payments are provided to clubs following their relegation from the Premier League.
This season it will instead benefit from £7m for broadcasting rights with the English Football League.
In regard to cash inflow, almost £25m was generated through player sales in 2017/18 - the figure included the first instalments from James Maddison's transfer to Leicester City and Josh Murphy's move to Cardiff.
However, it also spent £20.1m in buying new talent.
Mr Balls said while the accounts reflect the sale of Maddison and Murphy, the money received is only the first of many payments.
He explained: 'When you buy or sell a player, the money comes in or out over a number of years.
'If you look at the last financial year, those numbers are expenditures we made on players in the Premier League.
'It is also the cash coming through the door for sales we made in the last window, and the window before.
'It's always very hard to try and match individual players to individual financial years because it is a more complex business.'
In 2017, player purchases stood at £27.6m, while £29.7m was brought in through sales.
Sporting director Stuart Webber said the club's financial situation would have been 'dire' had it not sold several players last season.
He said: 'If we had not done those deals we would not be stood here now, or the club would look significantly different in terms of what we would have gone through.
'We are grateful we got those deals done, and even more grateful we got them done pretty early in the window so we could invest in the squad.
'We now have to get into position where when we sell a player, more of that money comes back into the club to invest in infrastructure and to invest in other players on the pitch, rather than selling them to cover costs we have incurred.'
Mr Webber said promotion to the Premier League would solve a 'really big challenge' financially.
But he added that the club should not 'gamble everything' on the hope of returning.
'So many clubs have done that and it has not worked,' he said.
'We have probably got to the position we are in now because were in the Premier League and gambled on staying there, and it didn't work.
'That is why, fundamentally, we have to sell [the likes of] James Maddison and Josh Murphy.'
City saw income from its ticket sales increase slightly from £9.2m in 2017 to £9.8m in 2018.
That is despite the average home attendance falling to 25,960 from 26,354 in 2017.
The club generated a further £9.5m through 'operating activities' and a further £5.1m from the Canaries Bond.
The amount of money paid to its highest earning director (Steve Stone) was £100,000 in 2018 - compared to £417,000 last year (for Jez Moxey).
Mr Balls said: 'This year's annual accounts again underline the on-going challenge of managing a sharply declining income year on year since we left the Premier League - and yet still remaining absolutely committed to supporting an exciting squad of players capable of competing well in the top half of the Championship.
'As a club, we've collectively rolled our sleeves up to face the challenges.
'Our football costs have more than halved since the 2015/17 season and despite this, our sporting director Stuart Webber and head coach, Daniel Farke have done a great job recruiting shrewdly and bringing through talented young players to produce a balanced, hungry and competitive squad.'