McNally lifts lid on ‘exceptional costs’

City chief executive David McNally has shed more light on the 'exceptional costs' that contributed to the club's loss of �5.75m in the year ending May 31, 2010.

The Canaries' annual accounts, released this week, show that a combined total of �2.64m went on promotion bonuses, the cost of the dispute with Colchester over the recruitment of Paul Lambert as manager, pay-offs to departing players and staff, legal and professional fees, and compensation to directors and senior executives.

City paid out �856,000 in bonuses for winning promotion from League One at the first attempt, plus �465,000 on 'compromise agreements' for players and other football staff who left in a year of upheaval behind the scenes.

'Bear in mind we have replaced the whole backroom team in 12 months, so there has been some significant change,' said McNally.

The exit of Lambert, assistant boss Ian Culverhouse and football operations manager Gary Karsa from Colchester cost City a total of �626,000 in Football League fines, compensation and legal costs.

A further �173,000 went to directors and senior executives in compensation for loss of office, while �520,000 was paid in 'legal and professional fees in connection with strategic activities'.

Said McNally: 'These cover quite a number of different projects – some of the advice on property, the advice on the investment search and the financial restructuring project, which has been a year-long project at least.

'So you have to engage with lawyers and professional advisers and, while the amount is cumulatively a large one, it was essential.'

He accepted losses over the 12-month period were 'significant' but forecast better results this year.

'It's never nice to post a loss and we've posted a significant loss this year but it was expected, given that we are in the early stages of a business turnaround here,' he said.

'We do expect to take this club back up to the Premier League over the course of the seven-year plan that we put in place and it was an essential part of our developing the foundations of that plan that took place in the year that's just been posted.

'Making a profit is very unusual in the world of football these days. But at the very least you need to be at a neutral position or cash break-even, so we need to get back to those days and we will do during the course of the current financial year.'

City's net debt was reduced to �20.9m by the sale of car park land to Broadland Housing Association for �2.1m – after they failed to attract new investment.

'We have excellent professional advisers in Deloitte, who have helped us on the investment search and other matters,' said McNally. 'They have not been successful in a difficult market in finding somebody who put together a credible business proposition to the club.

'But when you consider how difficult Liverpool have found it and the fact that Newcastle United were on sale for almost two years and they weren't able to find significant new investment, the market's not been right for that.

'So we had to have a plan B and, in the absence of new investment coming in, we are focusing on selling non-core, non-football property assets. The sale of a car park or any other non-core, non-football asset will be used to pay down debt.'

The sale and lease back of Carrow Road, mooted as one option by the board 12 months ago, was not on the agenda, said McNally, who also ruled out further staff cuts after the club's non-football employees were reduced from 199 to 181 in the 12 months to May.